The shipping industry’s challenges will persist into the first half of 2024 due to high inventory levels and reduced consumer spending, a CNBC survey found.
The freight market is expected to see minimal or no growth in the first half of 2024, according to a CNBC survey released in November. Freight rates will remain low or even decline due to excess capacity.
Logistics executives have mixed predictions for LTL (less than full-truckload) freight rates in the first quarter, with half expecting a 5% increase, while the other half expect rates to remain flat or fall by as much as 15%. For full-truckload rates, the majority expect rates to remain flat or fall, with only about 33% predicting a 5% increase.
Noah Hoffman, vice president of CH Robinson North America Trucking, predicts that trucking will be slow even during the peak retail season. Rising fuel costs and falling freight rates have forced many trucking companies to close or shift services. Meanwhile, Tim Robertson, CEO of DHL Global Forwarding Americas, said the market is quite unstable, and companies are betting on inventory strategies.
The survey also found that 67% of respondents do not expect orders to increase during the Lunar New Year. Part of the reason is China, which shuts down most manufacturing during the holiday.
In addition to freight volume, logistics companies' revenue is also affected by prices. Most respondents expect ocean freight rates to remain flat or fall in the first and second quarters. Air freight rates are also expected to remain flat or fall by 10% to 20%.
As demand for cargo slows, FedEx has encouraged its pilots to seek additional work with American Airlines. Maersk, the world's largest shipping giant, recently announced 10,000 layoffs, citing weak demand, prices returning to historic levels and inflationary pressures on its cost base. Overcapacity in most regions has driven down prices and many suppliers are expected to exit the market or make significant layoffs.
However, CNBC still expects a modest increase in cargo volumes in the second half of 2024, ranging from 5% to 15%. "The first half of next year may not be promising, but a recovery in the second half is possible," said Brian Bourke, Global Commercial Director at SEKO Logistics.
