Spot rate indexes vary, but overall indicate that the US container shipping market is trending down again.
Developed countries continue to struggle with the effects of galloping inflation and recession, which make the outlook worse in Asia. Demand for containers continues to decline and volumes are returning to pre-Covid levels.
Ocean transport profitability reached historically high levels during 2022, primarily driven by exceptionally high average freight rates. The operational and supply chain disruptions that impacted the market for most of 2021 gradually abated during 2022, as congestion and Covid-related restrictions eased. Accordingly, schedule reliability also improved during the second half of the year.
In 2023, demand for consumer goods is expected to slow. Geopolitical uncertainty will remain high, with some long-standing trade relationships expected to be reconfigured. The result will be the beginning of a fundamental reset of supply chains in which they are increasingly shaped by political choices. Global demand for containers is expected to decline in 2023. The global ocean container market is expected to grow little if at all, at a rate of between -2.5% to +0.5%.
After a bumpy 2022, 2023 could prove to be even more challenging for the global goods trade. There is weakening consumer demand, recurring oversupply, the continuing energy crisis, and inflation, all against the backdrop of the ongoing invasion of Ukraine and more recently a major earthquake in Turkey that shook global supply chains. The global economy is feeling the effects. Softening demand has sent down spot rates on major trade lanes, ending an extraordinary two-year period for container shipping.
“As the container shipping market had a relatively calm import season peak, there were expectations that North American import freight rates would continue correcting downward but stabilize in the New Year. We’re now two months into 2023 and now we're all wondering where the bottom is. Although governments around the world are trying to support demand with large fiscal stimulus packages, significant uncertainty around rising energy bills in Europe, tightening US credit conditions and a subdued Chinese growth environment do not paint a positive picture. Consumers are also facing economic uncertainty, and the strong US dollar has made it more expensive to import things to China,” says Tobias Sopalla, Chief Operations Officer Ocean Logistics at AsstrA-Associated Traffic AG.
“The market has faced lots of difficulties within the last three years: the increasing rates on transportation made it unfavorable to import goods from China; falling demand and Covid restrictions created problems with stable production circle and trading. Now, since China has re-opened in the end of 2022, the supply chains are starting to re-build again, but still there is shortage of work force and orders from the customers. These all has led to the fallen seafreight rates up to the pre-Covid times: as an example, TL CN-US rates have fallen from ~10k USD up to ~2k USD for 40ft container in average. That means lower profits for us as a forwarder, but at the same time the chance for the market to break out of this vicious circle,” says KseniyaTereshkina, AsstrA Business Accelerator Project Manager.
Author: Aneta Kowalczyk.