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In the final quarter of 2022, containerized freight volumes in the deep-sea container shipping market fell by a further 2.5%, marking the traditionally busiest period of the year as a “peak season without a peak”.
Volumes fell steadily in the first few weeks of 2023, and world trade continued to suffer as economies grapple with persistent inflation and high energy prices, dampening consumer demand for commodities in nearly all economic sectors.
Commenting on the latest release of the GSF/MDS Intermodal Container Shipping Market Review, James Hookham, Secretary General of the Global Shippers Forum, said: “This is no longer just a supply chain or shipping issue, with shippers and carriers firmly in the driver’s seat globally. Economic forces are themselves dealing with economic structural weaknesses and geopolitical tensions.”
Mixed
“For many shippers, forecasting volume and inventory requirements for the remainder of the year is a leap into uncharted territory, as few but most experienced encounter such a variety of influencing factors.”
The inflationary impact of the Covid crisis and tightening consumer spending will linger into the second quarter of the year as interest rates remain high and central banks signal they are likely to go higher.
On the demand side, many operators and service providers expect a recovery in demand in the second half of the year, but this is more hopeful than expected – with few economic signals to support such optimism.
The arrival of new shipping capacity, the apparent questioning of the interests of shipping alliances and the inevitable reduction in vessel space utilization are also changing the shape of the supply side of the container shipping equation.
spot rate
Shippers have undoubtedly benefited from the sharp drop in spot freight rates over the past nine months, with costs on many routes returning to pre-pandemic levels. But for shippers, weak demand for their core products will be more of a concern than shipping costs. While wary of how quickly demand may recover (as seen in 2020), many shippers are bracing for a rebound in freight rates that may not come for some time.
Shippers are also seeing a significant improvement in the predictability of port calls, with a significant improvement in the number of scheduled calls actually made by vessels compared to the third quarter of 2022. This is the first time since a review that began in 2020 that service quality indicators have improved across the board positively, albeit from a low base.
Hookham concluded: “This time is definitely different! How shipping lines respond to weak demand, manage existing excess capacity, deploy new ships and maintain port schedules, all of which will be tested in a year’s time for each existing vessel. Assessing the overall fuel efficiency of vessels will continue to be a focus of our monitoring of the market. The dollar value of interest rates may look the same as in 2019, but market conditions are completely different and even more unpredictable.”
drop in demand
Mike Garratt, Chairman of MDS Transmodal, commented: “Demand has fallen noticeably, while liner capacity has increased slightly, improving the negotiating position of shippers. Connectivity between markets has improved as rates have fallen and the return of more multi-regional services However, due to the contract rates agreed in the previous year, the average revenue per TEU remains high relative to costs, as reflected in the liner companies’ published results for 2022. Some consortiums continue to enjoy over 30% market share.” — trade arab news agency
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