US manufacturing orders from China down 40% in unrelenting demand collapse

    WORLD  08 December 2022 - 11:56

    US logistic managers are bracing for delays in the delivery of goods from China in early January as a result of cancelled sailings of container ships and rollovers of exports by ocean carriers.

    Carriers have been executing an active capacity management strategy by announcing more blank sailings and suspending services to balance supply with demand. “The unrelenting decline in container freight rates from Asia, caused by a collapse in demand, is compelling ocean carriers to blank more sailings than ever before as vessel utilization hits new lows,” said Joe Monaghan, CEO of Worldwide Logistics Group, CNBC reports.

    US manufacturing orders in China are down 40 per cent, according to the latest CNBC Supply Chain Heat Map data. As a result of the decrease in orders, Worldwide Logistics tells CNBC it is expecting Chinese factories to shut down two weeks earlier than usual for the Chinese Lunar New Year - Chinese New Year’s Eve falls on January 21 next year. The seven days after the holiday are considered a national holiday.

    "Many of the manufacturers will be closed in early January for the holiday, which is much earlier than last year,” Monaghan said.

    Supply chain research firm Project44 tells CNBC that after reaching record-breaking levels of trade during the pandemic lockdowns, vessel TEU (twenty-foot equivalent unit) volume from China to the US has significantly pulled back since the end of summer 2022 - including a decline of 21 per cent in total vessel container volume between August and November.

    Asia-based global shipping firm HLS warned clients in a recent communication about the ocean transport business climate.

    "It seems to be a very bad time for the shipping industry. We have the combination of declining demands and overcapacity as new tonnage enters the market,” it wrote.

    Central banks, including the Federal Reserve, are raising interest rates to cool demand, which helps to push down supply chain prices that had been at record levels. But the monetary policy to fight inflation is walking a fine line as a supply-demand resetting can turn into a recession. More CEOs are citing the risk of recession, signs of a weaker consumer and slowing sales, and the market remains unconvinced the Fed can engineer lower inflation without forcing a “hard landing” on the economy.

    HLS analysts are predicting a further 2.5 per cent decline in container volumes and a nearly 5-6 per cent increase in capacity in 2023, which will continue to negatively impact freight rates in 2023.


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