We will soon come to a new year in 2024. Reflecting on the current condition, the logistics and transportation (shipping) businesses next year will mostly stay the same from this year (2023). The market volume will grow slowly, while the freight rate will be steady, even lower than in 2023.
2024 is set to be a record-breaking year again, with an estimated 3 million TEUs of new capacity entering the market. This combination of excessive available capacity and low demand is pointing to extreme overcapacity in the market.
The international shipping association, BIMCO, estimates that the global container volume will increase by just 3% to 4% in 2024, while the global ocean fleet will grow by 7.8% to reach a record high of 2.7 million TEU. The transport and logistics industry is facing a testing combination of declining demand for freight alongside increasing capacity.
The Drewry Supply/Demand Index forecast 2024 is 74.3, the lowest Drewry Supply/Demand Score ever reported. For reference, 100 is the benchmark for “Market Equilibrium”. Anything below 100 represents that supply is outpacing demand. This Supply/Demand environment will likely lead to very low-rate levels, an increase in carrier capacity management via blank sailings, slow steaming, and adjusting sailing string availability and frequency, among other things, to try and buoy rates at a level that allows the carriers to remain profitable.
2024 will be a year of significant challenges for freight forwarders. They will have to withstand economic uncertainty, political instability, and technological disruption. At the same time, there will be the potential to benefit from new opportunities, again in the realm of technology, as well as in sustainability. Through strategic investment, careful planning, and prioritizing resilience, freight forwarders can help maximize their potential for success.
The result of this scenario for freight forwarders is increased competition. Customer loyalty may waver, meaning freight forwarders need to work harder to differentiate themselves in the market, for example, through customer service and value-adding services. Operational efficiency will be equally important to maximize profitability. At the same time, rates will continue to be impacted as carriers compete for a smaller cargo pool.
Buy & Read ISG December 2023: https://sociabuzz.com/isgct/p/isg-december-2023