Bolloré Logistics expects 2024 to be a "challenging year" for the air and ocean freight markets citing continuing trends from 2023 and emerging issues for the new year, such as the outbreak of attacks in the Red Sea and new sustainability regulations.
The freight forwarder noted that in 2023, the industry's landscape was shaped by overcapacity, shifting consumer demands, new regulations, and geopolitical tensions, and the container shipping market entered a "state of high anxiety" due to unforeseen "Black Swan" events.
Despite real geopolitical (wars, superpower tensions) and macroeconomic (inflation/interest rates) challenges, however, the global economy and container demand remained relatively resilient.
Global port throughput also performed better than predicted, expanding by 1.4% year-on-year (YoY), with a recovery of 2.3% expected in 2024.
Bolloré said this year, despite improvements in the demand outlook, container shipping continues to face challenges due to the overcapacity that accumulated during the pandemic years.
It noted that in 2024, the global containership fleet is projected to grow by 6.8%, with ship delivery capacity expected to reach a new record high of 2.7 million TEUs.
"This overcapacity is expected to depress container freight rates, with a drop of 33.6% forecasted by Drewry, indicating a significant downgrade from previous predictions" — adding that the Drewry Supply/Demand Index forecasts a score of 74.3 for 2024, the lowest ever reported.
Bolloré said to maintain profitability; carriers will implement strategies such as blank sailing, slow steaming, and adjusting sailing string availability and frequency, among other measures, to keep rates at a viable level.
In terms of the air freight industry, which experienced soaring costs during the COVID-19 pandemic and subsequent sharp declines in 2023, still saw a 32% increase compared to pre-pandemic levels.
Return to 'classic seasonality' for air cargo
However, despite recent market volatility, Claude Picciotto, head of air freight procurement at Bolloré Logistics, predicts that "2024 could see a return of 'classic seasonality' with stability in rates and capacity."
The overall air cargo market is expected to grow in 2024, with demand predicted to rise by 4.5%, according to IATA. It added that Middle East carriers are expected to post a 12.3% increase in air cargo demand, followed by Latin America at 7.7%, Europe at 4.1%, Asia Pacific at 3.6%, North America at 2.1%, and Africa at 1.5%.
Bolloré noted how the air freight market in 2023 saw a surge in capacity — with the overall air cargo capacity increased by 10% in December 2023 compared to December 2022, boosted by a robust 17% growth in passenger belly cargo.
"The outlook for global air freight capacity suggests that it will likely continue to exceed market demand, with airlines planning significant increases in passenger capacity in the first quarter of 2024 compared to the same period in 2023," the French freight forwarder added.
Meanwhile, Bolloré said the container market is anticipated to grapple with "persistent overcapacity issues, as well as new sustainability constraints."
It noted that global average air freight rates increased around 8% in December 2023 compared to the previous month, though there was a decline of 18% compared to the same period last year.
It noted that a significant increase in spot rates was observed from Asia Pacific, primarily led by China, due to strong e-commerce expansion.
"To address this supply issue and strike a healthier balance between the introduction of new vessels and the disposal of older ones, carriers may need to adopt structural solutions," Bolloré said.
In addition, it added that environmental regulations such as the Emissions Trading System (ETS), which came into effect on January 1, 2024, will have a "significant impact."
Bolloré said ocean carriers will be under pressure to minimize their carbon emissions and meet emission reduction targets, necessitating the adoption of sustainable practices and innovation.
"Considering these challenges, the ocean freight market is set to make considerable strides in sustainability," it said, adding that maritime freight will transition towards low-emission fuels like LNG and hydrogen-based fuels, thereby reducing greenhouse gas emissions.
Concurrently, electric and hybrid technologies are gaining traction, further contributing to the industry’s environmental efforts.
"However, the path to sustainability is not without its hurdles. The ongoing instability within the container shipping industry is expected to result in a significant decline this year, a trend that is strongly forecasted to persist, given the 76% YoY decrease in Operating Cash Flows in 2023," Bolloré said.
Compounding these challenges, the end of the year has seen the container shipping market significantly impacted by the situation in the Red Sea.
The rerouting of vessels via the Cape of the Good Hope led to an increase in transit time (10-20 days), refuelling delays at African ports and container imbalances.
This has strained capacity and led to surcharges.
Bolloré said that given the volatility of the situation and the ongoing disruptions, these trends are expected to continue into 2024, further affecting the global supply chain.
As a result, the industry will need to adapt to these changes and find ways to mitigate the impact on the global supply chain.
"The current volatile situation could disrupt the forecasted slow demand of the year," said Irwin Lefebvre, head of ocean freight Procurement at Bolloré Logistics”.
On the air freight side, ocean carriers with air cargo aspirations will persist.
The congestion in the ocean market caused by the pandemic has led to a surge in shippers opting for air freight.
To capitalize on the opportunities within this faster transport mode, shipping giants, including CMA CGM, Maersk, and MSC, continue to encroach on the downstream market for cargo canvassing.
The e-commerce trend is expected to continue shaping the air freight industry in 2023.
With the surge in online shopping and consumers' expectations for rapid delivery, e-commerce has emerged as a significant driver of air freight demand.
Businesses have embraced e-commerce and expanded their online presence, leading to an increased need for efficient and reliable air freight services.
Carriers and logistics providers have had to adapt to meet the evolving demands of the e-commerce sector.
Lastly, air freight will concentrate on Sustainable Aviation Fuels (SAFs), which can reduce carbon emissions by up to 80%. The ReFuelEU law will mandate a minimum share of SAF usage, and airlines will modernize their fleets for improved fuel efficiency and a reduced noise footprint.