DP World anticipates freight prices to fall by 15% to 20% in 2023, with the worst still to come as demand declines, according to Yuvraj Narayan, deputy chief executive and chief financial officer of the Dubai-based global logistics giant.
The first symptoms of a big drop in demand, according to Narayan, were obvious, and freight prices on the shipping side had dropped significantly on particular routes as institutions such as the International Monetary Fund (IMF) cut growth expectations.
Freight rates are the prices at which cargoes are transported by container from one location to another around the world. “It is clear that there is a massive drop in demand, inventories are not clearing up the orders are not coming through,” he said on Monday, according to Zawya. “We have not seen the worst of it yet,” he added.
The world’s main producing and consuming economies, China, Europe, and the United States, had the most challenges, according to DP World’s Narayan in an interview on the margins of the World Economic Forum (WEF) in Davos. According to Narayan, there has been a dramatic drop in freight rates of anywhere between 20% and 50% from their peaks last year throughout shipping freight rates.
According to Narayan, three major variables were driving this, including disruptions during the COVID-19 epidemic, inflation in Europe as a result of the oil price surge, and serious disruptions to global supply networks. These disruptions were continuing as a result of the Ukraine conflict and Russian sanctions, he added. DP World, which is a major port operator, according to Reuters, has been talking to the United Nations and Kyiv about providing safe passage for the transportation of grain out of Ukraine but has yet to get the necessary approvals, Narayan added.
“We have the ability to do that … we are confident we can do it if they say it is OK to do it,” said Narayan. Ukrainian grain exports from Black Sea ports and ways to unblock fertiliser and food exports from Russia have been the subject of intense diplomatic negotiations since last year. Ukraine is a major global grain grower and exporter, but its shipments fell significantly due to hostilities in many regions and Russian blockades of its seaports.
Narayan also said the Ukraine war had forced DP World to put its Russia investment plans on hold. “There were new trade routes that were going to get established and we were out there as potential partners,” said Narayan. “Basically we put everything on hold till we get a clearer political picture,” he added.
