Container shipping prices are coming down

The latest from Drewry’s Container Forecaster

In the latest Container Forecaster report released Thursday, the cycle of the pandemic-boosted container shipping boom has undoubtedly changed in recent months, but ongoing congestion can hinder rapid normal recovery. .. Falling demand in has led to weekly lowers in container spot fares over the past four months, and high inflation has lost confidence that volumes will recover significantly. “Sure, we feel like we’re at the beginning of the end of the bull market in the container market,” says Drewry. Shippers have proven that they can adopt strategies to maintain profits in small quantities, as reflected in the first quarter results, but container ship inventories have certainly been hit. I am.

Container market improvement

While the container market is steadily improving, Drewry reports, high interest rates and airline profits can take some time to eliminate, and no significant easing is expected until late 2023. Forwarders still have the trump card. It’s not surprising that container fares have reached unsustainable levels, but as supply chain problems continue, it’s still unclear when the market will return to normal. According to the Drewry’s World Container Index, this week’s price was down 3% per 40-foot container to $ 7,066, down 16% from a year ago, well below the peak of September 2021 at $ 10,377. It’s about twice as long as 5 years. average.

Container prices are down year on year

Despite the decline, Drewry says the shipping company still holds an ace card. Port congestion at , which is the main reason for the surge, remains a problem, and Drewry says there are still no signs that the port congestion will disappear. Drewry points out that the market is likely to see “very quick normalization” once the port congestion is removed. In fact, AIS vessel tracking data show that the number of container vessels waiting outside major ports is increasing and there is little hope of an immediate resolution. “If there is no change in the expected supply chain recovery schedule, the market will continue to be denied capacity that would otherwise have been accessible,” says Drewry. China’s zero-tolerance policies associated withCOVID-19, labor negotiations at ports on the west coast of the United States, and the high risk of inflation-related labor shortages remain wildcards, increasing market uncertainty.

Another good read: Container Shipping News: Spot rates below 2021 & current contract rates

Port congestion issues

The congestion issue is a global challenge, but Drewry states that it “clearly does not have the same impact on prices” as it did when the pandemic began.”The situation is still bad to prevent a sharp fall in short-term interest rates, but sentiment towards the global economy and container demand seems to be reasserting as a driving force for prices,” Drewry said.Overall, Drewry expects the container ship market to grow 2.3% in 2022, but “it certainly doesn’t come naturally, especially given the speed at which economists are downgrading GDP forecasts.” I admit.“Unexpected slowdowns or reductions in volume accelerate the decline in spot rates and reduce the time it takes to clear port congestion.

Looking ahead

“Unexpected volume of deceleration or contraction accelerates spot rate declines and reduces the time it takes to eliminate port bottlenecks. “ Looking further ahead, supply chain congestion is eliminated. From the second half of the year, the container market is expected to ease significantly, which will also occur at the same time as the massive influx of new container ships, ”says Drury. Conclusion … Drewry states that the end of the container boom cycle will require a paradigm shift from everyone involved.“Marine carriers need to address the looming environmental and overcapacity risks by dismantling old, non-environmentally friendly vessels.

Another good read is: What will happen to the container shipping industry when the capacity is up by 30% in the next 2 years?

Drewry’s Container Forecaster can be found here.

Source: G Captain

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