Ocean container shipping market seems reaching peak: Analysis
The spiralling ocean container shipping market of recent months appears to be reaching a peak – but how is it is possible to tell and where does it go from here?
2024 will still be a difficult year
It is likely that ocean freight markets will soften as they did during March and April, but shippers should move forward with caution.
There is now a very real prospect of union strike action at ports on the US East and Gulf Coasts, while a Trump presidency could see businesses rush to frontload imports ahead of increasing tariffs on imports from China (as well as from the rest of the world).
Port congestion – one of the main protagonists of the current market spike - is easing and the delivery of more new ships will increase capacity further in the remainder of the year. However, global shipping networks are still under immense strain and it will not take much to push the needle back into the red and rates heading skywards.
There are also question marks over the traditional Q3 peak season, which is already under way. Shippers frontloading imports earlier this year has contributed to record-breaking container shipping demand out of the Far East and this should mean a slacker peak season than there would have otherwise been.
This is supported in the fact spot rates are now softening at a time when seasonality usually places upward pressure on the market.
But with ocean supply chains still under huge pressure, concerns will remain over a capacity crunch in the coming months, especially if other disruptions such as union strikes and China tariffs come into play.
Will this solve shippers’ problems?
Average spot rates remain up by 382% from the Far East into the US West Coast since mid-December last year, by more than 300% into the US East Coast and 457% into North Europe.
Even if the market is reaching a peak, shippers are still paying hugely elevated costs. The trade from the Far East to North Europe now stands at USD 6,970 per FEU compared to USD 1,530 in mid-December last year.
To put this into perspective, importing goods on this trade using the spot market currently costs an additional USD 6.97 million for every 1,000 containers shipped.
2024 has seen record-breaking monthly volumes of 887,000 TEU shipped on this trade, however, it should be remembered not all containers are transported on the spot market and the long-term market has remained relatively flat in comparison.
While shippers should be prepared for a difficult second half of 2024, the latest market movements should offer some hope over increasing available capacity. At the very least this will reduce the risk of shippers having cargo rolled.
Shippers also have the opportunity to use data to identify the early signs of a rising and falling market – which will be vital in the coming months.
Xeneta concluded by saying that it has produced a mid-year Outlook report assessing the impact of the Red Sea conflict on ocean container shipping, potential disruptions in the remainder of 2024 and how the market may develop in the coming months.
(Continued from Thursday)
Source: Exim News Service: Oslo, July 25