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Shipping rates are stabilizing and this will balance global trade, box industry leaders say
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Bigger ships will increase fleet size, further driving up demand for containers
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600 industry leaders discuss current state, challenges and forecasts in this week’s Digital Container Summit organized by Container xChange
Despite falling spot prices, container logistics industry leaders are upbeat on business prospects in 2023 and beyond as stabilizing shipping rates are expected to balance global trade and liners add huge new vessels, reviving demand for containers.
The box industry’s upbeat future was among the topics discussed as some 600 container logistics leaders participated in the Digital Container Summit (DCS22) organized by Container xChange to discuss the current state, challenges and forecasts for the industry.
The 4th edition of the annual summit held October 4-5 was organized by Hamburg-based Container xChange, an online platform for container booking, management and payment.
The meeting was held against a backdrop of falling spot rates amid excess capacity due to weakening demand, and ocean liners trying to shore up prices by blanking sailings on the Asia-US West Coast and Asia-Northern Europe corridors.
Market analysts have expressed concern over the likely impact when part of the 7.1 million twenty-foot equivalent units (TEUs) of new, large container vessels ordered two years ago start joining the global fleet in 2023. This overshadows the 6.6 million-TEU peak in 2008.
“A huge number of new large container ships are going to hit the water at a time of stagnating demand,” warned Alphaliner shipping analyst Stefan Verberckmoes in a report on Tuesday. “The market could struggle to absorb all these new ships.”
Some of the giant ocean liners that will take delivery of newbuildings starting 2023 are:
- OOCL – Twelve 23,000-TEU vessels ordered in 2020 to be delivered in 2023; ten 16,000-TEU ships ordered last year to be delivered from Q4 2024 to Q4 2025.
- HMM – Twelve 13,000-TEU ships from Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries for delivery in H1 2024.
- CMA CGM – A total of 22 vessels ordered April 30, 2021 from CSSC Group comprising 6 LNG-powered 13,000-TEU containerships, 6 LNG-powered 15,000-TEU vessels, and 10 VLSFO-powered 5,500-TEU containerships.
The Digital Container Summit, nevertheless, sees a silver lining in the newbuildings. “Shipping rates are stabilizing, and this will in turn balance global trade. Many shipping lines are expecting huge ships with big fleet sizes which will further increase the demand for containers. These are some positives for the container industry,” the panel said.
Container xChange said summit attendance had grown sixfold since it began in 2019. “Originally, DCS had started with 100 attendees in 2019 and today we have around 600 container logistic professionals joining this networking event. We are happy to host this event where professionals interact, network and learn about the market from each other through keynote sessions, roundtables and of course from 1:1 meetings.” said Christian Roeloffs, cofounder and chief executive of Container xChange.
The event this year was highly interactive with 124 sessions scheduled. “This has been the USP (unique selling proposition) of DCS that it is unlike any other traditional summit for our industry,” said Johannes Schlingmeier, cofounder and also CEO of Container xChange.
Martin Dixon, head of research products at Drewry, said: “We have downgraded our outlook for the container shipping trade for 2023 from 2.5% to 1.5%. There is a very high probability of further downgrades to this outlook.”
Dixon said that in Europe, there is a considerable number of choices for carriers to adjust schedules at different ports while in the US, the choices are relatively limited.
“The cancellation rates of sailings at both Asia to Europe and Asia-North America stretch are around 20% now. So, there is already quite some disruptions around how carriers are managing capacity and we are expecting to see more of such to follow,” Dixon said.
Peter Sand, chief analyst at Xeneta, said Far East-US West Coast freight rates are US$4,000 starting in October, still elevated by at least 100% pre-pandemic levels.
“Be aware that these are prone to further fall. But we see some resilience in the trans-Atlantic market. Shippers are still signing long-term contracts at elevated levels, while this year has been the record-breaking year for carriers in terms of making profits,” Sand said.
Eric Johnson, director at S&P Global and senior technology editor at JOC.com, commented: “We’ve seen a migration of cargo from US West Coast to US East Coast and the uncertainty that still surrounds the ILWU/PMA negotiations is looming upon the trade.
“There is also the impact of congestion minimizing from a vessel call perspective at the US West Coast. Shippers have frontloaded a lot of volume in the beginning of 2022 so as to avoid key shipments arriving late. 55-56% of volumes have been directed from the West Coast to East Coast. The ports have done a very impressive performance for handling the cargo.”
In the panel discussion, Andrea Monti from Sogese and Danny den Boer from SeaCube Containers examined the ongoing challenges and how the market is shaping up.
“Our market research indicates that depot utilization is high and the idle time of containers is increasing. The changing market conditions are preparing for another round of disruptions into the year 2023. For instance, increasing energy costs could potentially lead to difficulties for some players. The trend of decreasing freight demand, too, is here to stay,” Monti summed up.
“What we now see is a reverse trend as compared to the record year 2021. The demand is falling and so are the rates. The industry witnessed a massive increase in the fleet size, and this also means that there will be a great influx of containers into the secondary market, especially the dry units,” said Seacube’s Den Boer.
Supal Shah, chief executive of Arcon Containers India, said shortage of equipment in China caused further delays and added to the container problem.
“I strongly believe that ocean freight is still healthy although has started coming down. Demand for one-way containers and the pickup fees from China has already started to moderate,” he said.
