LONDON, U.K.– With a score of 45.4, the December edition of the Stifel Logistics Confidence Index has recorded its lowest ever total, amidst a continued pattern of decline.
Of the four trade lanes covered by the Index, Europe to US continues to be the most positive, representing the highest-scoring route across both air and sea as well as current and expected situation, with continued strength of the US dollar against the Euro helping to boost performance. By contrast, the performance of trade lanes between Europe and Asia, in both directions, continues to be poor.
Within the air freight industry, increasing numbers of passenger planes, combined with what IATA has termed “a tough global economic environment and feeble world trade”, is resulting in increasingly poor load factors. Industry competitors have been somewhat protected by low fuel prices, but it is unclear how long this situation will persist. The underlying capacity problem, therefore, remains.
Steps are now being taken to tackle the overcapacity crisis endemic in the shipping industry. Following news of Maersk committing to lay-up an 18,000 TEU vessel last month, on December 7th, the world’s third-largest container shipping line, CMA CGM, agreed a deal with Temasek Holdings to acquire the struggling Neptune Orient Lines. On December 11th that Chinese authorities gave the green light for a merger between state-owned giants China Shipping and COSCO. The projected consequences of these deals will see the lines involved in the round of consolidation, along with industry leaders Maersk and Mediterranean Shipping Company, control nearly half of global container shipping capacity, said the Stifel analysis.
The total air freight logistics confidence Index contracted by 2.3 points in December 2015, amounting to 46.6. The Index is 9.2 points lower than in December 2014, and 9.8 points lower than in December 2013. Regarding the present situation, the air freight Index fell by 1.6 points to 43.8. Following a now well-established pattern, all lanes posted month on month declines with the exception of Europe to US, which gained 1.0 points to reach 57.4. By contrast, US to Europe stood at 42.6 after losing 3.5 points, whilst Asia to Europe and Europe to Asia lost 1.1 and 3.1 points respectively, totalling 41.3 and 34.8.
In the 6-month outlook, there were no exceptions to the pattern of decline that saw expectations fall 3.0 points to 49.3. Europe to Asia recorded the slightest change out of the four lanes, having fallen by 0.1 points to 47.4. Following this was US to Europe, which was down 1.5 points to 49.2. Whilst Europe to US stood out once more as a positive at 54.2 points, it also recorded a significant month on month decline of 4.6 points. Worse was Asia to Europe, which, at 46.9, had dropped below the 50 point mark by losing 5.5 points in December.
The logistics confidence Index for sea freight declined by 1.8 points to 44.3. Compared with the same month in 2014, the Index is 14.7 points lower, and it is also 14.3 points lower than in December 2013.
For the present situation, the Index fell 3.3 points to 40.7. All lanes noted declines in December, though Europe to US lost only 0.8 points, and therefore remained in a stronger position than the others at 55.0. Having declined by 4.7 points from November, Europe to Asia was the weakest of the lanes, and recorded a total of 32.9. Asia to Europe noted an even greater decline of 5.0 points, and stood at 36.1. US to Europe recorded a moderate loss of 2.6 points, which brought it to 40.4 overall.
The expected situation Index for sea freight was more positive than the present situation, with mixed results aggregating to a 0.2 point decline. Europe to US saw the most positive result, gaining 0.8 points to 56.9, whilst Asia to Europe similarly gained 0.7 points to score 47.8. Europe to Asia saw a 0.3 point decline to 44.7, but US to Europe was down 2.1 points to 42.7.