Air, sea freight carriers’ confidence still down in June, says Ti

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CEA_Boeing_B777-200F_bOverall confidence levels in the logistics sector remained negative in June, although they continued to edge up toward the neutral 50 point mark, according to the latest edition of Transport Intelligence’s (Ti) Stifel Logistics Confidence Index.

In global container shipping, being closely watched are the ongoing alliances, mergers, and acquisitions as consolidation continues. In May, six carriers grouped together to form the “THE Alliance,” which includes K Line, Nippon Yusen Kabushiki Kaisha Line, Mitsui O.S.K. Lines, Hapag-Lloyd, Hanjin Shipping, and Yang Ming Marine Transport.

Moreover, in June, shareholders of United Arab Shipping Company showed support for the company’s likely merger with Hapag-Lloyd. The deal will place the resulting entity as the fifth largest container line in the world measured by capacity. Meanwhile, third-place CMA CGM is expected to consolidate its position with the impending takeover of Neptune Orient Lines this month.

Nonetheless, in the current environment of fierce competition among carriers, freight rates continue to decline, causing substantial reductions in contract rates for exporters and importers buying under contract.

For sea freight carriers, the overall confidence index improved by 3.1 points to 47.6 in June year-on-year. This rise was precipitated by an improvement of 1.5 in the present situation index, and growth of 4.6 points in the expected situation index.

The present sea freight index was still in negative territory, as were all four individual lanes surveyed. The Europe-U.S. lane fell the most, and the U.S.-Europe lane declined as well.

In contrast, the Asia-Europe lane demonstrated a big increase, and the Europe-Asia lane indicated a small improvement as well.

Growth in the sea freight expectations index was more pronounced, with gains across the board. This was led by a sizable improvement on the Asia-Europe lane, followed by the U.S.-Europe lane, and the Europe-Asia lane. The most minimal increase was registered on the Europe-U.S. lane.

As the container shipping industry continues to struggle, 2016 is seen by analysts as another weak year for air freight. The overall weakness of demand, coupled with continued capacity growth, is likely to continue throughout the year, though air freight volume data between March and April showed improvements in all regions except Latin America.

On the other hand, for the passenger side of the air industry, while it is enjoying high demand, growth “may be shifting down a gear.”

“Though passenger traffic growth rates are still likely to remain higher than those in air freight, this is something to observe closely,” said the report.

For air freight, the aggregate logistics confidence index once more gained 0.4 points, totaling 50.4 for June 2016. This is 9.2 points lower than in June 2015, and 3.4 points beneath June 2014.

Air freight carriers’ confidence in the present situation fell in the month, principally the result of the slip on the Europe-U.S. lane, followed by declines on the U.S.-Europe lane, and the Europe-Asia lane. The only lane to buck the trend was Asia-Europe.

In marked contrast, air freight players’ expectations rose in June, with the U.S.-Europe lane the one loop to record a contraction. The greatest improvement was on the Asia-Europe lane, followed next by the Europe-Asia lane, and trailed by the U.S.-Europe lane.

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