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Container rates are experiencing a significant decline, with contract rates moving closer to spot rates
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The February 2023 Asia News Update released by logistics tech company Container xChange noted a sharp decline in container prices and leasing rates following the oversupply of containers in October 2022
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Carriers have been trying to offload their inventory
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in Southeast Asia, average container prices dropped by 32% year-on-year to $2,590 in January 2023
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Pickup charges have also significantly declined by 78% from $311 in December 2022 to $67 in January 2023.
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The long-term outlook for the shipping industry remains uncertain, as the low consumer demand in North Europe and the slow market pickup in China suggest that the shipping industry will continue to struggle
Container rates in various regions are experiencing a significant decline, with contract rates moving closer to spot rates—and it looks like a hopeful prospect is not in the immediate future.
In a statement, logistics tech company Container xChange (CxC), noted that this trend is particularly evident in China and Southeast Asia. “Despite the decline in container rates, the demand for shipping remains weak due to global inflation and restricted demand, leading to a significant drop in freight prices,” it said.
Container prices in major ports across Asia, such as Ningbo, Shanghai, and Singapore, have fallen sharply in the past year, indicating that the current situation may persist in the foreseeable future. Prices of a 20-foot cargo-worthy container in these top three ports of Asia saw a significant decline. The average price in Ningbo decreased from $2,460 to $1,290, while in Shanghai it fell from $2,370 to $1,270, and in Singapore it went down from $2,410 to $1,240.
“Container trends are a crucial barometer of economic progress and global trade, and the current market outlook appears bleak. Container prices and leasing rates are plummeting, with the global shipping industry witnessing a freefall in container rates. The blank sailings have not been able to control the sliding prices, and the mid-term outlook for the industry indicates a slowdown in container trade on Asia to EU and Asia to America trade lane. However, contract rates are closer to spot rates, indicating the lack of demand for long-term commitments, which can be attributed to market uncertainty”, said Christian Roeloffs, CEO and co-founder of CxC.
Meanwhile, Asia-US West Coast container rates in January 2023 are 11% lower than in January 2020 and Asia-US East Coast rates in January 2023 are 84% lower than in January 2022.
Although China recorded a trade surplus in 2022, it was largely due to strong export growth in the first quarter of the year, which slowed down as the year progressed. The slow pace of exports and outbound container volumes is expected to continue into the first quarter of 2023, the CxC report said.
In Shanghai, the price of the box itself (all types and conditions) has been steadily dropping. In January, the average price of a cargo worthy 40ft DC was $1,712. And the average price of the same in Moscow until December was $1,710.
The low consumer demand in North Europe and the slow market pickup in China also suggest that the shipping industry in that region will continue to struggle.
The average pick-up rates from China to ports in North Europe remain low, with 20ft container rates averaging $861 and 40ft HC rates averaging $823 until January. In January 2022, the average pickup charge for a 40HC on the same route was over $3,000.
“Intra-Asia trade is showing some resilience, with comparatively better demand for containers. Nonetheless, the mid-term outlook does not project demand to rise to the heightened levels witnessed in 2020 and 2021, except for a possible inventory replenishment cycle that may bring about some demand for containers. The falling rates and increased availability of containers in certain regions of the world are indicative of weak demand and slower economic growth.”, he added.
In January 2023, the average cost of a 20-foot container in Northeast Asia was $1,300, while it was $1,250 in Southeast Asia.
In summary, CxC said the global shipping industry is facing a complex situation, with the continued freefall in container rates, weak demand, and a shift in trade routes. “While the shipping industry may witness a rebound in the future, the current outlook remains uncertain,” it said.
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