Disruption Report #65: Will Too Much Inventory Force a Race to the Bottom? A Possible Railroad Strike Is Back on the Table. Too Many Containers and Too Little Demand.

Morgan Stanley: Declining Demand Plus a Glut of Inventory Is Major Concern FOR RETAILERS

Morgan Stanley has released a statement reflecting grave concerns about the current combination of full retail warehouses at a time of declining demand.

Faced with a glut of inventory, companies will need to decide whether they want to accept high costs to continue holding inventory, destroy inventory, keep prices high and take a hit on the number of units sold, or slash prices to stimulate demand. We believe many will turn to aggressive discounting to solve their inventory problem which is likely to spark a ‘race to the bottom’ as companies attempt to cut prices faster than peers and move out as much inventory as possible.”

Morgan Stanley says jaw-dropping inventory levels a ‘key risk’ to retailers, Racchel Premack, Freightwaves, October 11, 2022

Morgan Stanley Survey Reports Ordering Levels Lowest Point in Its History

According to the Morgan Stanley Shipper Survey, in which some 100 corporations regularly share their transportation needs and macro expectations, net ordering levels have reached the lowest point in the survey’s 12-year history. Ordering levels are down 40% year over year. Net inventory levels are also unusually high.

Morgan Stanley says jaw-dropping inventory levels a ‘key risk’ to retailers, Racchel Premack, Freightwaves, October 11, 2022

THE POSSIBILITY OF A Railroad Strike Is Back On the Table

It looked like we were going to dodge the bullet on a railroad strike, but it looks like we’re back in the crosshairs. The 3rd largest U.S. railroad union, the “Brotherhood of Maintenance of Way Employees Division,” voted the negotiated agreement down. A strike is now possbile but not imminent as both sides return to the bargaining table.


Drewry, the Maritime research organization, is projecting that next year will see an increase in container capacity of 11.3% but only a 1.9% increase in demand. That means downward pressure on ocean freight.

However, that doesn’t mean we are heading back to pre-Covid freight rates. Here is how Splash247.com explains it:

“Today’s rates still remain well above pre-covid levels. Freight is twice as high as the 2019 average, charter rates are still two and a half times higher, while the the Shanghai Containerised Freight Index (SCFI) is 100% above the 2010 to 2019 average and Clarksons’ charter rate index is only 20% off the 2005 peaks in the previous boom.

Where’s the floor for container shipping? , Sam Chambers, Splash247.com, October 10, 2022

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