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Global Freight Recession to Persist in 2024: CNBC Supply Chain Survey

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Gloomy Outlook for Global Shipping Industry: CNBC Supply Chain Survey

The global shipping industry continues to grapple with a freight recession, and the challenging economic conditions are expected to persist into 2024, as revealed by the latest CNBC Supply Chain Survey. High inventories and reduced consumer spending are cited as key factors contributing to this bearish outlook.

Survey Insights and Industry Perspective

The CNBC Supply Chain Survey, conducted among logistics executives responsible for freight manufacturing orders and transportation, including major players like C.H. Robinson, SEKO Logistics, DHL Global Forwarding Americas, Kuehne + Nagel, OL USA, and ITS Logistics, provides valuable insights into the industry. These companies have a unique vantage point, as they handle product pickups from ports and distribute goods from warehouses to retailers. This perspective offers a three-to-four-month advance insight into retail consumer expectations, freight rates, and the projected volumes to be moved by truck and rail.

Projections for 2024

According to the survey, the freight market is expected to experience little to no growth during the first half of 2024, resulting in stable to downward pricing. However, there is hope for a volume increase in the second half of the year. The lack of significant freight movement is anticipated to lead to continued soft pricing as capacity outstrips demand.

Challenges for Trucking Companies

Trucking companies, which are paid per load, face potential revenue challenges due to low expectations for orders, particularly impacting the upcoming holiday season. Logistics executives are divided on the outlook for Less-Than-Truckload (LTL) freight rates, with some expecting a 5% increase while others anticipate rates to remain unchanged or decline by as much as 15%. Similarly, expectations for full truckload rates are mixed, with the majority predicting no change or a decrease, while 33% expect a marginal increase of 5%.

Industry Shakeout and Uncertain Future

The freight recession has taken a toll on the industry, leading to closures and layoffs. Rising fuel costs, falling freight rates, and overcapacity have forced many trucking companies to shut down or shift their services to larger fleets. The uncertain market climate and mixed expectations for rates and volumes underscore the challenges faced by logistics companies. Companies are making different inventory strategies, with orders for product categories like household goods dropping for some and increasing for others.

Anticipated Turnaround and Lingering Uncertainty

The survey indicates a muted outlook for orders surrounding the Lunar New Year, with the majority of respondents not expecting an increase. Shippers are placing orders early to avoid potential disruptions caused by China's manufacturing operations shutting down during the holiday. However, there is a glimmer of hope for a slight turnaround in freight volume in the second half of 2024, with varying levels of optimism among respondents. In conclusion, the global shipping industry faces significant challenges as the freight recession persists. The low freight prices, coupled with diminished cargo volumes, have led to layoffs and a reshaping of the industry. While there is cautious optimism for a rebound in the second half of 2024, the overall climate of uncertainty continues to define the market.

Impact of Freight Recession on New Business Ventures

The global shipping industry is currently in the grip of a freight recession, with challenging economic conditions projected to continue into 2024. This gloomy outlook, as revealed by the CNBC Supply Chain Survey, could significantly impact new business formations, particularly those reliant on global supply chains.

Understanding the Freight Recession

The freight recession is marked by high inventories and reduced consumer spending, leading to soft pricing as supply outstrips demand. For new businesses, this could mean lower transportation costs, but it also signals a sluggish global economy that could affect overall business growth.

Implications for Business Planning

Businesses planning to launch in the near future need to factor in these conditions. The survey's insights into retail consumer expectations, freight rates, and projected volumes provide valuable data for strategic planning. For instance, the anticipated increase in freight volume in the second half of 2024 could inform the timing of product launches or expansions.

Challenges and Opportunities

The freight recession presents both challenges and opportunities. On one hand, low expectations for orders and the potential for reduced revenue could hinder growth. On the other, the downturn in the industry could lead to competitive pricing and opportunities for negotiation with logistics providers.
Preparing for the Future
Despite the freight recession, there is cautious optimism for a rebound in the second half of 2024. New businesses should stay abreast of industry trends and adjust their strategies accordingly. While the current climate is uncertain, those who can adapt and innovate will be best positioned to thrive when the market eventually rebounds.
Story First Published at: https://www.cnbc.com/2023/11/07/freight-recession-will-continue-in-2024-cnbc-supply-chain-survey.html
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