Year-end Peak Shipping Season Expected To Be Flatter Amid Global Headwinds

Year-end peak shipping season expected to be flatter amid global headwinds

Why this year's peak shipping season may be more of a plateau.

Written by

The Business Times


26 September 2023

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This year's peak shipping season may be more of a plateau, said industry players, as macroeconomic conditions limit retail spending and retailers continue to hold excess inventory.

"We don't expect a classical peak-season surge in the fourth quarter, even though we foresee market improvements in the next few months," said Niki Frank, chief executive of DHL Global Forwarding Asia-Pacific.

"Since we are not ruling out a modest increase in demand during the run-up to the turn-of-the-year holidays, shippers should still be mindful and be prepared to cope with larger volumes towards the end of the year."

There are typically two peak seasons each year: from August to October, as companies prepare for high retail sales in November - partly due to events such as Singles' Day and Black Friday - and Christmas. There is also a shorter peak period just before Chinese New Year.

For 2023, industry players expect a slight increase in shipping in the third quarter, but for the usual peak season to be relatively flat. Consumer demand has been dampened by high inflation and rising interest rates, while retailers still have excess inventory from 2022, they said.

"Some uptick in shipping is expected, though global trade may not experience the normal peak season as consumer demand is not showing the expected signs of recovery," said Wong Siew Loong, president of transport company Kuehne+Nagel Asia-Pacific (K+N).

Glen Hilton, chief executive and managing director for Asia-Pacific at ports giant DP World, expects overall trade will "hold steady", similar to 2022 when the year-end season was also relatively flat.

Last year, retailers stocked up to avoid chaos ahead of the peak season, but demand was lower than expected.

In a July report, online container platform Container xChange noted that Asia-US trade - a key component of the traditional peak - was bogged down by the "lingering effects of weak demand and the problem of excess (retail) capacity."

For the first six months of 2023, container exports from Asia to the US were down 21.8 per cent from the year-ago period, or 8,171,160 twenty-foot equivalent units.

Both Wong and Greg O'Shea, country manager of Singapore and Malaysia at supply chain consultancy TMX Transform, said that in the near term, a slowdown in traffic at the Panama Canal could also disrupt supply chains.

Panama has faced a historic drought since August, lowering the canal's water level and causing traffic jams. The waterway handles 5 per cent of the world's trade.

Despite the lack of a peak, however, the current situation is still a "marked improvement" from the year-ago period, said O'Shea, as China's retail supply chain is now back in full swing.

While the recovery of cargo demand in the East-West trades is expected to take some time, the growth in emerging economies such as Southeast Asia, Latin America and Africa remains resilient and consistent, said Kenichi Michida, senior vice-president of strategic yield management at Japanese shipping company ONE.

Real-time data and analytics can help businesses grapple with the continued uncertainty in supply chains and logistics, added industry players.

K+N's Wong said the company's real-time data platform can alert clients about potential risks such as severe weather conditions and port disruptions, as well as other alternative routing options to mitigate potential disruptions.

DP World's Hilton said: "Covid has underscored the importance of maintaining supply-chain resilience, not just during peak seasons but year-round. Businesses are better at optimising their supply chains by leveraging robust historical data and algorithms, leaving the guesswork out of the picture."

This article was originally written by Derryn Wong and published in The Business Times on September 26, 2023.

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