Across the Pond: The European Transportation Market (October 2022)

Author’s Note: I was asked by Transporeon (a Talking Logistics sponsor) to look at what is happening in the European transportation market and they provided me with access to their Transporeon Insights market data for additional insights and perspective. I once again shared my commentary for this month in a brief Transporeon Journal video commentary. Below are my introductory remarks. I encourage you to watch the full commentary for more details on what is happening in the European transportation market.

Here we are in the final quarter of 2022, a year that has turned out to be, from a supply chain and logistics perspective, as challenging and volatile as the previous two.

We began the year dealing with a new Covid variant (Omnicron) and the outbreak of war between Russia and Ukraine. Sadly, the war continues today, bringing ongoing risks and uncertainty to supply chains and everything else in the world.

And the economic environment today is much weaker than it was at the beginning of the year, with slowing economic growth and record inflation around the globe.

This is the world that supply chain and logistics professionals find themselves in today. And this is the time of the year when they start putting together their strategies and budgets for the coming year — When they start asking a very basic question: “What do you think is going to happen next year?”

The honest truth is that nobody really knows for sure. And this is especially true when it comes to the transportation market. If we have learned anything the past two years, it is to expect the unexpected.

That said, here is one outlook from the World Trade Organization published on October 5th: 

“World trade is expected to…remain subdued in 2023 as multiple shocks weigh on the global economy. WTO economists now predict global merchandise trade volumes will [increase only 1.0% in 2023] — down sharply from the previous estimate of 3.4%.”

The Russia-Ukraine war, monetary policy tightening, and continued Covid-19 outbreaks (particularly in China) are among the headwinds.

Meanwhile, as reported by CNBC on October 11th, the International Monetary Fund predicts global growth will slow to 2.7% next year, a decrease of 0.2 percentage points than its July forecast.

In a speech at Georgetown University in early October, IMF Managing Director Kristalina Georgieva said, “We are experiencing a fundamental shift in the global economy, from a world of relative predictability … to a world with more fragility — greater uncertainty, higher economic volatility, geopolitical confrontations, and more frequent and devastating natural disasters.”

This slowdown in global trade growth is already being felt in ocean shipping. A growing number of scheduled sailings from Asia to the United States, as well as from Asia to Europe, are being canceled. 

And as Transporeon presented at its Ocean Annual Conference earlier this month, China-to-North Europe spot rates are below contract rates for the first time in two years, and spot rates from China-to-North America West Coast ports are down 85% from peak, while contract rates, as assessed by Transporeon Market Intelligence, are currently down 20%. 

Transporeon’s analysts summarized the situation this way: “While contract rates on all Ex-China trades are trending downward, the battle to establish the rate level for the upcoming tender season is still ongoing and we will likely see further downward corrections.” 

In addition to slowing economic growth and high inflation, we’re also seeing growing labor unrest around the world, with strikes at the Port of Felixstowe and Port of Liverpool in the UK in September and October 2022, and the potential for a rail strike and ports strike in the United States. 

So, as you can see, the outlook for the rest of 2022 and the coming year with regards to the economy and global trade is overwhelmingly pessimistic.

What does this all mean for the transportation market in the year ahead? Again, it’s impossible to predict with high certainty, but the first step is to look at the data we have and how things are trending.

Let’s start by looking at a new index Transporeon introduced called the EU Cost Index that shows the evolution of costs for trucking carriers across the 70 biggest lanes in Europe […]

For more insights, data, and advice related to the European transportation market, please watch the full Transporeon Journal commentary.