Maersk Asia Pacific market update (April 2023)

Supply chains around the world continue to slowly recover from the pandemic, but volatility and inflation issues remain a concern. Port congestion, which was much higher during the mid-pandemic period, has slightly increased in March. There have been some positive signs and we have recently upgraded our global GDP forecast from 1.5% to 1.8%, but that recessionary risks remain, even if the timing is uncertain.

If there are any new topics you would like to talk about, please let us know by filling out our survey form here.

Market Trends

PMIs(Purchasing Manager’s Index) suggest that growth momentum has improved slightly in early 2023. The global composite PMI began to rise in January, and this trend has continued through March. Both manufacturing and services are driving this upward trend as China continues to reopen and energy prices have fallen. Manufacturing orders-to-inventory ratio remains unchanged in March, but manufacturing export orders fell slightly.

The United States headline inflation rate has peaked at 5%, slowing for the ninth consecutive period and settling below the previous market forecast of 5.2%. The squeeze on consumer purchasing power should fade, but core inflation, excluding food and energy, remains high. It is currently uncertain when this will come down to the Federal Reserve’s inflation target of 2%.

Meanwhile, the European headline inflation rate has also peaked, and consumers will benefit from the overall inflation coming down. However, core inflation (excluding energy and food) is still at a record high.

Trending Topic - A focus on cybersecurity in the supply chain

Malicious cyber-attacks have been around for years, but targeting supply chains is a new area of emphasis for hackers. Cyber-attacks against supply chains have increased by 742% over the last three years. The average cost of a supply chain cyberattack is USD 4.35 million, meaning companies need to remain aware of the risks and countermeasures associated with this threat. According to a McKinsey report, 93% of supply chain executives are actively working to make their supply chain more resistant to cyberattacks, yet only 21% feel that their current supply chain is highly resilient.

Manufacturing, retail and healthcare are the industries most frequently targeted for these attacks, but any industry involved in logistics can be at risk. Additionally, companies in Asia experienced a disproportionate amount of these strikes, accounting for 25% of global supply chain cyberattacks.

To counter the rising cyber security threat, global spending on security is expected to rise another 12.3% in 2023, reaching USD 219 billion.

Risk factors to remain aware of: Much like any other area of the supply chain, companies can avoid losses by remaining aware of potential risk areas. For cyberattacks, the following weaknesses are most often exploited.

Third-party risk: Many supply chains are fragmented, relying on a combination of third-party suppliers, vendors, agents and partners to manage the logistics process. Each of these parties represents a potential entry point for cybercriminals, making a company’s choice of partner more important than ever. This also serves to highlight the benefit of an integrated supply chain, as minimizing the number of links in the chain can mean a lower risk of a partner experiencing a security breach.

Inside risk: Employees and contractors often have access to sensitive information, which can lead to accidental or malicious leaks. An excellent digital supply chain management platform is the best way to manage this risk, as a well-designed platform will feature both access controls and monitoring.

Legacy systems: A large number of cyberattacks occur through the use of outdated or unpatched software in the supply chain. This creates an easy entry point for hackers, who are able to exploit security holes that could have been easily avoided. The easiest way to mitigate this risk is to ensure both your company and your partners stay on top of new software updates, finding viable alternatives if the developer no longer supports your current software.

Trade Outlook

The expected economic downturn seems to have been delayed. As of now, the first quarter of 2023 has been better than initially expected. Falling energy prices, a warm winter and China’s rapid reopening are the key drivers for this. We have revised our global GDP growth forecast for 2023 from 1.5% to 1.8%.

However, it is essential to note that only the timing has changed. The overall economic outlook for 2023 remains weak, with a low projected growth. Several risks could contribute to a downturn, including financial instability, sticky inflation, geopolitical risks and potential recession in Western economies.

We are keeping a close eye on two significant economic factors: consumer activity and manufacturing. Consumption is moving sideways, and the production of goods remains depressed. The question is, will consumer goods consumption collapse, and if so, when? We have seen US consumer demand holding up in the first quarter, but global manufacturing activity remains weak due to high inventories and low confidence in future consumer demand. This situation creates massive volatility for both ocean and air transport, while warehousing remains less dynamic. There are two areas of transition that have the ability to effect change over future patterns for trade and supply chains in the future: nearshoring and climate policy.

Keep up to date with any changes on our advisories page here: Advisories | News & Advisories | Maersk

News Bites

The steady rise of direct-to-consumer (DTC)

A recent survey showed that many companies expect their DTC business to experience rapid expansion over the next few years. Consumer fulfillment channels are expected to contribute as much as 50% of overall sales, representing a significant change in the way these companies do business. A higher ratio of DTC sales will require massive adjustments to logistics models, with a large emphasis placed on areas such as last mile delivery, digitalization and visibility.

The ever-present phishing phenomenon

A recent Business Wire report points out that shipping and logistics companies remain the fourth most likely to be impersonated in phishing scams. This is in large part due to the daily presence of these companies in a consumer’s life, leading to a higher success rate for these scams. Companies such as DHL, FedEx, and even Maersk have found their names misappropriated for these scams, highlighting the importance of customer awareness regarding this potential risk. A friendly reminder: All genuine correspondence from Maersk will come from @maersk.com domain names.

The increasing importance of ultra-fast delivery

A McKinsey report shows that nearly 50% of online shoppers abandon their cart when they feel the shipping time is too long. As a result, fast delivery is now seen industry-wide as a critical growth lever for e-commerce businesses, and this is reflected by 99% of retailers saying they plan to offer same-day delivery by 2025. Whether or not this target can be reached remains unknown, but it does show the importance retailers will continue place on speed in the supply chain. Strong visibility, last mile delivery and multimodal transportation will all be important factors in helping realize this goal.

Ocean Update

Mainland China’s economic growth is reviving after the end of zero-Covid policy and we see, retail sales, service sectors as well as industrial production grew, as an overall result we see the export volume increase, especially into Africa and Latin America markets.

Port situations are stabilized globally including US and Europe. In China with the upcoming fog season, we forecast certain impact on the terminal operations. 20’ Equipment starts to get tight, particularly in north China.

Key Market Outlook Across Trade Lanes

Monthly Vertical Insight: FMCG

According to Allied Market Research, the global fast-moving consumer goods (FMCG) market is predicted to reach USD 15,361.8 billion by 2025, growing at an incredible 5.4% over the next five years. This is due to new avenues which will provide greater business opportunities. Research from Statista also shows that e-commerce is growing faster than traditional brick and mortar stores every year. Revenue in the eCommerce market is projected to reach USD 2,059.00 billion in 2023. The ecommerce sector in Asia is expected to show a compound annual growth rate (CAGR) of 11.9% between 2023 and 2027 – a projected market volume of USD 3,228.00 billion by 2027. User penetration in Asia will be 61.0% in 2023 and is expected to hit 73.1% by 2027. Consumers are demanding new product offerings such as healthier and sustainable products, and this is expected to open new roads for FMCG players.

The FMCG industry has a new problem on its hands. With markets around the world facing an impending slowdown and Europe in the middle of an energy crisis, consumption of packaged goods is expected to slide. On the other hand, input costs for FMCG companies are rising, weighing on margins. Unlike in the past, when FMCG companies focused mainly on delivery to stores, supermarkets and wholesalers, today, brands are expected to cater directly to the consumer, often via ecommerce logistics services. They have to get the right product to the right customer, at the right time. However, from production and collection, to storage, customs clearance and delivery, various segments of the supply chain are susceptible to risks and challenges. Adding to the complexity are external factors like regulatory changes, emerging markets, changing consumer behaviors, weather, and pandemics. This calls for a significant revamp of FMCG supply chains, allowing for delivery to local hubs and direct to consumers.

Is end-to-end visibility the solution for your FMCG supply chain? Find answers to this question and learn how FMCG businesses can benefit from supply chain visibility here.

Experimentation is a buzzword in the FMCG world today. An influx of younger, more open-minded buyers has accelerated that trend. Consumers want products that are different and authentic, with 73% of Asian shoppers demanding innovation, but from brands familiar to them*.
*Source: Retail in Asia

To succeed in the fast-moving FMCG space-especially here in Asia requires a constant flow of creativity: new flavors, new foods, new formats, new packaging. Winning in such a competitive market requires maintaining a consistent effort towards innovating the offerings in order to provide the hungry market in Asia with the new and irresistible foods and packaged goods they desire.

Getting these new products into the hands of consumers introduces challenges into the supply chain both upstream and downstream. New sourcing partners must be found and integrated into the existing supply chain. Further down the supply chain, these raw materials and products need to quickly reach their destination to maintain speed to market.

Click here to download our latest e-book for free to find out how optimization in supply chain helps FMCG deliver irresistible recipes.

Air Update

Greater China Area:

Maersk own-controlled freighter network activated in Hangzhou, China
April 6, the new air freight services with Maersk Own Control Boeing 767 Cargo flights between Hangzhou, China and Billund, Denmark, and Rockford, US were activated on Hangzhou Xiaoshan International airport. With several flights regularly traversing these routes, it is expected to significantly increase access for high-value and time-sensitive cargo between the Asia Pacific and Europe and the US.

Along with the air freight capacity provided through our strategic airline partners, the newly onboarded air routes enhance the Maersk Air Cargo capability by offering reliability and a new level of efficiency to integrated logistics. Click here visiting Air Freight OCFO campaign page and explore more.

The market in Greater China Area is moving positively in March due to two main factors: A warm e-commerce market led by Pinduoduo and other large brands and End-of-quarter general cargo booming in high-tech. We did not see a significant impact in Europe trade during the strike.

We have successfully launched Maersk Air Cargo flights HGH-BLL-HGH / SHE-GSP-SHE / HGH-RFD-HGH, each fully using up chargeable weight with perfect density management.

Japan:

New Cargo Area Will Also Be ‘Phased Development’
Narita International Airport Company (NAA) has released an interim summary of its ‘New Narita Airport’ concept, which includes plans for a new passenger/cargo terminal and a new cargo area. The study group, consisting of academic experts, government officials, and local municipalities, is discussing the direction of passenger and cargo facilities, transportation access, and community coexistence. The new passenger/cargo terminal will be established with a view to future functional integration, and the development policy for the new cargo area will be phased. The interim report does not indicate a specific development scale or schedule for the cargo area, but a larger space than the existing ‘Northern Cargo Area’ has been allocated. The NAA will finalize a specific development plan and submit it to the review committee again.

'Japan Logistics Federation Unveils FY2011 Business Plan: Enhancing Public Relations Efforts to Tackle the Looming 2024 Challenge'
The Japan Federation of Logistics Organizations (Ryuryunren) unveiled its business plan for fiscal year 2023 in a press conference held in Tokyo on the 29th. The organization aims to strengthen its public relations activities for shippers and consumers, particularly regarding the impending 2024 problem and sustainable logistics. Chairman Junichiro Ikeda expressed his concerns about the growing labor shortage crisis in the logistics industry and highlighted the need for collective efforts to solve the issues. To this end, Ryuryunren plans to conduct a fact-finding survey on overseas logistics conditions in Vietnam, a country that has been identified as a potential target for global supply chain review. The organization also plans to continue its efforts to reduce environmental impact by holding the Logistics Environmental Grand Prize and promoting low-carbon and decarbonization in the logistics field. Furthermore, the Diversity Promotion Working Team will work on promoting the active participation of the elderly to address labor shortages and improve logistics productivity.

Japan's Major Freight Carriers Cut Weekly Flights in April 2023 Amidst Pandemic Woes
In April 2023, 13 major freighter carriers departing from Japan will operate a total of 243 weekly flights, which is a reduction of 4 flights from the previous month. This marks a decrease of 5 flights from the same period of the previous year. Looking at the monthly changes, All Nippon Airways and Nippon Cargo Airlines reduced some flights while adding others, while China Airlines increased flights on some routes. Cathay Pacific Airways suspended multiple flights due to a public holiday, while Asiana Airlines decreased the number of flights to return to the basic plan from two months ago. The weekly flights of the 13 airlines in the past 12 months have varied from 229 to 252 flights per month, with April's flights remaining at 243.

Oceania:

April sees the return of higher flight frequencies departing Australia and New Zealand underpinned by a growing passenger confidence around international travel.

China and Hong Kong capacity remains very open with freight costs easing for larger volume movements.

Vietnam Air products enjoy freight savings from both SGN and HAN into main airport ANZ with less demand on capacity.

Bangladesh and India freight costs remain slower to react due to market easing. However, it is anticipated that upcoming larger aircraft and additional flight rotations will enable savings on cargo and passenger travel.

Indonesia freight levels remain very similar to March for both Australia and New Zealand corridors.

Australia to New Zealand capacity continues to hold freight costs at higher levels.

Additional savings can be made for customers with higher flexibility of transit time and selection of indirect services.

Vietnam:

Vietnam status remains similar to February, with demand remaining soft. On the supply side, some carriers have withdrawn aircraft out of Vietnam or cut capacity due to low demand.

Indonesia, Philippines:

Air demand ex-Indonesia and Philippines continues to be slow. This is impacting rate but we do have room to negotiate with airlines. The short week in April for the Idul Fitri Festival and Holy Week is slowing business due to road restrictions, public service closures, mass leave and other factors.

Capacity from Indonesia and Philippines is open for all major destinations.

No current routing issues, as capacity is manageable. Maersk has activated dedicated truck for airfreight and import warehouse facility for Indonesia. Also, Maersk has activated a facility in Eco Zone (bonded warehouse) for export from the Philippines.

Inland Services Update

Greater China Area CHB Update:

Since 2023, domestic new energy export sales have continued to rise significantly. According to data from the China Association of Automobile Manufacturers, in the first two months of 2023, 170,000 new energy vehicles were exported, a year-on-year increase of 62.8%. Among them, the annual export transportation volume of new energy vehicles at Shanghai Port is expected to exceed 40,000 TEUs. Compared to the 24,000 TEUs in 2022, this will represent an increase of nearly 70%.

The latest data from Shenzhen Customs shows that in the first two months of 2023, the export of new energy vehicles has exceeded CNY 3.6 billion and the export of EV batteries from Shenzhen port is close to CNY 13 billion, with year-on-year growth of about 2,300% and 62%. Since 2023, Nansha Port has exported a total of 7,251 new energy vehicles in 9 batches, a year-on-year increase of over 33 times.

Maersk Greater China Area Inland Shipping Update:

This month saw the activation of Huai’an barge solution, the first barge corridor from Northern Jiangsu area to Shanghai terminal, a great expansion in our East China footprint.

Four new sea rail corridors are now available in Fujian province. Nanchang, Ganzhou, Ji’An and Sanming are now connected with Xiamen port with railway, representing a large step toward extending our service in the region.

Maersk Greater China Area Intermodal Update:

Sea to rail is the most common mode of intermodal transportation. The ability to transport goods via rail to a port and then load onto a ship, or offload from a ship and transport by rail, remains one of the most effective ways to move cargo around the Asia Pacific region. This method has the advantage of simplicity, with cargo only needing a single declaration and inspection before it gets shipped off. In many developed countries, the combined sea-rail container transport volume accounts for over 20% of total port container throughout. However, many countries have yet to develop this method of intermodal shipping to its full potential. In China, the proportion of sea-rail combined transport represents just 2.6% of total port throughput, much lower than many other countries.

Intermodal sea-rail transportation has many advantages including speed, safety and a large capacity, which has led to increasing importance being placed on this concept. Over the last several years, China has successively issued policy documents including ‘Notice on Encouraging the Development of Intermodal Transport’, ‘National Logistics Hub Layout and Construction Planning’ and ‘Guiding Opinions on Building World-Class Ports’, all aimed at encouraging the development of intermodal transportation infrastructure.

The further development of intermodal transportation within China will help increase transportation efficiency, reduce logistics costs, reduce emissions and open up international logistics arteries. IT will also serve to increase stability in the supply chain, especially in relation to long-distance markets. In addition, this will encourage ports to strengthen cooperation with railways, shipping companies and other enterprises.

Maersk is heavily invested in the improvement and spread of intermodal shipping. After three years of development, we have now become a domestic Tier 1 sea-rail transport supplier, and we have nine major export ports in China. We have leveraged this network into over 70 sea-rail intermodal transport routes so far. Railway station advancements will help us build a central hub city (hub and spoke set-up) inland, promoting the development of Maersk’s own inland port. This will truly open up convenient and cost-effective logistics channels for inland customers.

Greater China Area Warehouse Update:

Mainland China: All sites operation are running as usual without no Covid-related impact.
Hong Kong China: All operations in HKDC resume as usual, with no more Covid measures in Hong Kong.
Taiwan China: All sites operation remains normal.

Indonesia:
We predict inland export volume to increase as we face Ramadan peak season during the first and second week of April 2023. Volume is expected to have a severe drop during the third and fourth week of April due to the long Idul Fitri holiday. We expect volume will rebound in May to compensate for the mid-April drop.

We predict inland import volume to increase in May due to mid-year peak season. We have deployed our Middle Mile service under Full Truck Load (Truck Box), with the main route in Intra-Java Area.

Philippines:
Philippine ports are at manageable levels averaging from BOA to 0.5 days waiting time. However, waiting time is expected to increase due to annual Holy Week port closures in the early weeks of April and industry slowdown during this period.

The easing of import regulations in the Philippines is causing a peak time for importations in the country. Operationally, no restrictions or caps on reefer cargo acceptance across the Philippines.

The Department of Finance is recommending additional imports of rice, corn, sugar, pork, and other key commodities this year to address an expected supply deficit and to tame prices, as well as pushing for the relaxation of import rules on imported sugar to ease elevated prices.

Thailand, Malaysia and Singapore:
The ‘less than container load’ (LCL) local market is down by roughly -30%. The impact of this is being felt very strongly across our portfolio, although we are still outperforming the market.

Many small to medium forwarders are struggling financially.

Rate normalization on ‘full container load’ (FCL) allows shippers to cost-effectively book full loads already at very low load factors, funneling previous LCL volumes away to FCL.

As we move into the second quarter, we see imports into Thailand, Malaysia and Singapore slowly improving again, although exports are still weak. Expectations are that stocks in Europe and North America will deplete during Q2, helping boost volumes again. However, we do not expect this will meet the extent of the volumes we saw during the height of the Covid-19 pandemic.

Japan:
Capacity for container drayage is stable in the market.
Expect a high season from the end of April into the second week of May (before and after long national holidays).
The 2024 issue, a new law limiting working hours for truck drivers beginning in 2024, remains a hot topic with both customers and vendors. However, a solution has yet to come to light.

Vietnam:
Due to the difficult economic situation in Vietnam and its main partners, trucking volume for importing raw materials for domestic production and exporting finished goods is expected to decrease.

As of April, the winter-spring rice harvest season will be over, causing both trucking and barging volumes for these commodities to drop significantly.

Myanmar:
On March 25th, infrastructure of some roads was damaged due to civil issues in the Myawaddy area. This is expected to impact inland trucking moves.

Maersk Product Updates:

The following updates to Maersk services will begin in April:

• New Cross Border Rail service
• Block train from Hanoi, Vietnam to Almaty
• Block train from Cambodia CFS WH to Sihanoukville Port
• New combined trucking and barging service in Myanmar

Truck from factories to Motamma depot, barge from Motamma depot to MITT (Myanmar International Terminals Thilawa). This update will solve the challenges of limited storage space, port congestion and insufficient vessel space for customers.

Major Ports Update

Vessel Waiting Time Indicator

Remark: Numbers are dynamic and subject to change.

Resources and tools to support you

Visit our “Insights” pages where we explore the latest trends in supply chain digitization, sustainability, growth, resilience, and integrated logistics.

Learn what’s happening in our other regions by reading our Maersk Europe, North America and Latin America updates.

Visit us at Maersk.com to handle everything from “Last Free Day” to online payments.

We value your business and welcome your feedback. Should you have any questions on optimizing your cargo flows, please contact your local Maersk professional.

Do you find this market update useful? If you haven’t subscribed to Maersk Asia Pacific Monthly Update yet, click the link below and stay posted!

Subscribe to Asia Pacific Monthly Updates

Please do reach out to us if you have any further questions about your supply chain. We are here to navigate you through the current situation.