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July 25, 2023

In Focus: Finding Bottom?

Christopher Clague

Senior Editor, Flexport Research

In early June we argued that, while improvements were clear, it was premature to claim global supply chains had returned to pre-pandemic norms. Since then, our proprietary measure – Flexport’s Ocean Timeliness Indicator (OTI) – has paused on its downward path to ‘normalcy.’ We look at the causes and ask, again, whether we might need to redefine normal for the post-pandemic era.

For the past thirteen weeks the OTI has moved very little in either direction on either the Transpacific Eastbound (TPEB) or the Far East Westbound (FEWB), the two major trade lanes it tracks. On the TPEB, the indicator has maintained a narrow band of 60 - 62 days; on the FEWB, it’s stayed in a range of 68 - 72 days and even ticked slightly upward in recent weeks. These are the longest stretches with the least variation since the OTI series began in April 2019, more than a year before the worst of the pandemic-era supply chain problems.

Until the current period, the OTI’s declines from peak disruption – spanning late fall 2021 to spring 2022 – on both the FEWB and the TPEB had been sharp, though not without interruptions. The TPEB, for example, held at 69 days for a five week period starting the second week of December 2022, while the FEWB jumped around between 75 - 81 days for a seven week period in February and April this year.

There are two related questions this raises. The first is whether this is a sign of the industry hitting bottom, the topic of Flexport’s latest State of Trade webinar. Our panelists weren’t sure about whether the bottom had already been found or if it would be in the fall or early next year. They were in agreement, however, that when it did, it would be long and flat due to a number of intertwined factors, including: an increasing number of blank sailings, if not outright cancellations; slow-steaming; more stops on routes and the duration of those stops; carrier over-capacity; and economic headwinds.

What we’ve been seeing in the OTI since mid-April certainly looks like the beginnings of a long and flat trend.

The second question is what this means for the fast-approaching peak season. Had the OTI continued on its downward path, it might have been reasonable to expect transit times to near their April - December 2019 averages of 54 days on FEWB and 46 on TPEB. As it stands, times on both trade lanes are about two weeks above those levels, with little to suggest significant improvements soon.

Expectations are already fairly low as regards a return to “before times.” If the OTI doesn’t budge on either trade lane over the next four to five weeks, it may be telling us that we have indeed found the bottom.

Disclaimer: The contents of this report are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. Flexport does not guarantee, represent, or warrant any of the contents of this report because they are based on our current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This report has been prepared to the best of our knowledge and research; however, the information presented herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this report.

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Christopher Clague

Senior Editor, Flexport Research

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