August 13, 2024
Image from PortCalls Asia for Unsplash
Despite the many difficulties that 2024 has brought for supply chains worldwide, freight brokers seem optimistic that conditions are soon to improve. Such, at least, is the main finding of the most recent expert survey from Bloomberg and TruckStop.
The survey itself gathered opinions of 113 freight forwarders and 3PLs with the bulk of participants having between one and fifty employees working for their organizations. Such, at least, could serve as an initial sample of opinions across the industry.
By and large, freight professionals seemed optimistic about the prospects of the coming months. When asked what they thought would happen to freight volumes in the next six months, 49% agreed that they were likely to grow. An additional 31% believes that freight levels are likely to remain the same until the end of 2024. Only 20% thought volumes were likely to decrease.
These opinions, however, are much in line with general trends in imports and exports cycles. Generally speaking, the bulk of trade operations tend to be stacked towards the second half of the year, as companies prepare for the increased spending associated with the holiday season. Since the Bloomberg/TruckStop poll focused on the first half of 2024 in contrast to the upcoming second half, such a conclusion was to be expected.
Yet these predictions are happening in a very different world than the norm. In the last couple of months, 2024 has proven to be a year packed with disruptions. Houthi rebels continue to attack merchant vessels headed to the Red Sea, effectively blocking the Suez Canal and the fastest route connecting Asia to Europe. Not surprisingly, seeking to avoid the risk of an attack, carriers have looked for alternative routes to reach the Mediterranean, sailing to the Cape of Good Hope and, in turn, drastically increasing delivery times. Not to mention the rising congestion in Asian ports due, in part, to growing standby times generated by the Red Sea Disruptions. Congestions in Asia are also the result of expedited shipments bringing various ports to capacity as many companies seek to rush products to the U.S. ahead of new tariffs. Simply put, there are lots of reasons to bet on complications to global supply chains resulting in lesser amounts of trade.
Not surprisingly given these trends, most freight brokers seem skeptical that spot rates are likely to decrease in the near future. When asked about their predictions for the value of spot rates, 76% of those surveyed believed the cost of freight is likely to remain the same or increase in the next six months. Conversely, only 24% are willing to bet on a decline of spot rates, as the Drewry container index records its highest points since the COVID-19 pandemic.
These growing costs, however, can have a mixed effect in freight broker revenues. For once, companies are likely charging more for spot rate, sending freight costs upwards. But, at the same time, disruption likely result in additional costs for freight forwarders in negotiating with carriers, incurring late fees, and even hiring extra hands to help with increased demand. The Bloomberg/TruckStop survey picked up on this pattern as well, registering that 44% of freight brokers saw worse margins in the first half in 2024 than usual, while 56% experienced better margins—a very even split. Curiclally, however, the number of brokers reporting worse margins is 13 points higher than on the second half of 2023, signaling that negative trends are far stronger.
Put together, the above suggests that freight brokers are dealing with difficult times but are optimistic about the end of year. This could well be an implicit bet that increased volumes in the latter half of 2024 will help increase volumes. But it could well imply a tacit bet that disruptions are likely to stop. Regardless of the motivation, a crucial fact remains: freight brokers believe the end of 2024 will bring more cargo than thus far in the year.
