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Freight forwarders will have room to negotiate better rates in the first half of 2023 as shipping rates slide, Container xChange says in its Market Forecaster report
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Spot rates will further plummet, with contract rates to follow suit, the online container logistics platform says
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This rate dive triggered by a box glut amid falling demand and reduced vessel capacity will lead to market consolidation, Container xChange says
An “all-out” rate war in the container shipping industry is forecast to break out next year in a significantly volatile market amid a box oversupply and reduced vessel capacity as liners resort to blank sailings to shore up rates as demand slows.
Container xChange, a Hamburg-based online container logistics platform, said in its latest Market Forecaster report that global shipping giant Maersk had advised continued capacity adjustments on its Asia to North America, Europe and the Mediterranean routes “to better align with demand fluctuations.”
Container xChange said in the December 7 report that a similar trend was echoing in the industry.
“In 2023, there is a high possibility of an all-out price war. It doesn’t seem that the capacity restrictions that we have seen in the past two years are due to return, so we’ll just have ample capacity both on the vessel as well as on the container side,” said Christian Roeloffs, co-founder and chief executive of Container xChange.
He said with the competitive dynamics in the container shipping and liner industry, he doesn’t expect players, especially the big ones, to hold back. This would lead to prices falling to almost variable costs and eventual market consolidation, said Roeloffs.
This starts with carriers initially defaulting and reducing their fleet, Roeloffs said. He cited recent news about China United Lines, an emerging transpacific and Asia-Europe services carrier that is at risk of defaulting on a charter party involving more than 10 containerships.
“Into 2023, freight forwarders will be able to go window shopping quite a lot, and there’s going to be a lot of room for negotiations, especially in the early parts of the year. Contract rates will follow suit as spot rates fall significantly,” Roeloffs said.
He forecast that efforts towards diversification of supply chain sourcing and manufacturing out of China will continue over the long term, and will need vision and strategy from companies looking for a more resilient supply chain.
Intra-Asia container volumes will increase and more countries will emerge as potential alternatives to China, such as Vietnam, India and more, Roeloffs said.
He said in an environment where margins will be tighter for freight forwarders and traders, costs will be a key issue and leaders will look for ways towards efficiency and business sustenance.
“Technology offers a great opportunity for leaders to minimize risk with data visibility and transparency while maintaining a healthy partner portfolio that helps greatly in testing times,” Roeloffs said.
Johannes Schlingmeier, also a co-founder and CEO of Container xChange, said a tight grip on costs will be paramount for freight forwarders going into 2023.
“While on one hand there will be a great deal of negotiations with shipping lines, on the other hand, operational cost optimization will be crucial for the forwarders,” Schlingmeier said.
He said there will be careful monitoring of the demurrage and detention charges, for instance; insurance charges, claims etc.
“As capacity on the ocean side becomes more abundant, there is a valid business case for using SOCs (shipper-owned containers) which not just offer flexibility but greater control to the forwarders,” said Schlingmeier.
The report said that from a macro view, it seems the experience over the past three years is a natural reaction of the market forces of demand and supply resulting from disruptions such as COVID-19 and subsequent lockdowns, Russia’s war against Ukraine, geopolitical risks and many more.
Container prices skyrocketed soon after the pandemic hit because there were not enough boxes to fill the rising demand, hence retailers and importers started to stock many more in advance to avoid the historic port congestions, the report said. But prices began to decline in September 2021.
The pre-peak season in 2022 saw record container throughput in import-heavy ports, but now that the stocks have been filled, demand is plummeting, the report said.
“Inflation and the energy crisis are leading up to cautious spending which will have its own impact on the container industry. The shipping industry will survive this, and we will again start to see normal activity levels in the future, though not immediate future. The good part is that the worst is behind us,” the report said.
