Across the Pond: The European Transportation Market (March 2023)

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 Market Insights data for additional insights and perspective. I once again shared my commentary for this month in a brief Transporeon Journal Market Update 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, and to hear from Patrick Pretorius, Director of Business Development North America at Transporeon, who shares some insights and advice on what’s happening in the ocean market, and Jakob Muus, Director Sustainability Tribe at Transporeon, who highlights some important developments in the sustainability realm.

When I was a kid growing up in New York City, the mayor at the time was Ed Koch, and he was famous for always asking “How’m I doin’?” to city residents. 

Collectively, those of us in the supply chain and logistics industry, can ask a similar question: How are we doing?

Well, at the macro level, we’re still dealing with a lot of issues. We just passed the 1-year mark since the start of the Russia-Ukraine war, and unfortunately, little progress has been made in ending the conflict.

In just the past few weeks, we’ve seen balloons from China flying over the United States, North Korea firing long-range cruise missiles, and Iran producing enriched uranium that is close to weapons grade.

Therefore, it’s not surprising that in a survey conducted in January 2023 with Indago’s supply chain research community, “Geopolitical-related disruptions” ranked second on the list of risks supply chain professionals need to plan for more effectively moving forward. (In case you’re wondering, “Labor shortage” ranked first by a small margin).

On the economic front, the International Monetary Fund (in a January 2023 update) projects global growth to increase 2.9 percent in 2023, which is 0.2 percentage points higher than it predicted in October 2022. However, this is still significantly below the historical average of 3.8 percent from 2000 to 2019.

The IMF also expects global inflation to fall “from 8.8 percent in 2022 to 6.6 percent in 2023 and 4.3 percent in 2024, which is still above pre-pandemic levels of about 3.5 percent.”

However, the latest inflation data from Germany, France, and Spain shows that bringing down inflation remains a big challenge. As reported by Bloomberg on March 1, “Consumer prices in Germany advanced 9.3% [in February] from a year ago, up from January’s 9.2% gain, driven by services and food costs.”

Meanwhile, as Bloomberg reported on February 28, “consumer prices in France jumped by a euro-era record 7.2% from a year ago in February [and] Spain saw a 6.1% increase. Analysts had estimated price gains would remain unchanged at 7% in France and to slow in Spain.”

Put all these puzzle pieces together and what you get is a not-so-pretty picture of the global economy in the months ahead.

How are we doing from a transportation standpoint?

Let’s take a look at data from Market Insights to get some perspective. On the morning of this recording, the Market Insights dashboard shows various trends over the past 13 months.

If you look at the Capacity Index, for example, it was 94.2 in February 2022. A reading under 100 indicates a capacity constrained environment. In February 2023, however, the Capacity Index was 112.1 — a 19% year-over-year increase. In other words, we’re starting this year with significantly more capacity in the market than at the beginning of last year.

How is this impacting spot and contract rates? Watch the short clip below for some Market Insights data and commentary. Then continue watching the rest of the video for additional insights, data, and advice related to the European transportation market, including Patrick’s and Jakob’s commentaries on what’s happening in ocean transportation and sustainability.