Strong container market slowing in the face of uncertainties

Date Added: 8 June 2022

Strong container market slowing in the face of uncertainties

With a comprehensive portfolio of ocean freight forwarding services around the globe, Davies Turner notes numerous reports in the international trade media that after two years of record results driven by a surge in volumes, capacity constraints, and port delays, the container shipping industry is starting to show the first signs of weakening.

Consumers are shifting their spending patterns, their is significant global inflation, and a looming recession is feared. All of which points to a ‘normalisation’ coming to the market that industry executives have been alluding to in recent months.

“The container market is facing significant and unprecedented uncertainties regarding both future demand and supply,” writes BIMCO's Chief Shipping Analyst, Niels Rasmussen. He notes that while the carriers have all reported strong results, container volumes have shown some early signs of weakening. “Though still high compared to the pre-COVID market, there has been a noticeable impact on rates and prices as well as activity in the asset markets.”

Among some of the indicators that BIMCO is highlighting are recent declines in head-haul and regional container volumes. While still up versus pre-pandemic levels in March 2019, they note that the volumes which are the drivers of rates and prices, profitability, and congestion, were down in March 2022 versus the year ago. BIMCO highlights that volumes into Oceania and Europe were particularly weak in March 2022 and whereas volumes into North America continued to show gains, they too in many places were showing slowing growth rates.

The result is further demonstrated as key indicators have in many cases come off from their highs reported in 2021. The China Containerized Freight Index (CCFI) has slipped 12.6 percent from its peak in early-November 2021. BIMCO reports that the result has been felt in the time charter market for example where rates have slowed since peaking in late March. Owners, they report, have had to accept much shorter time charter periods, which on average are now down to two years from a peak of four years in mid-2021. At the same time, second-hand prices appear to have peaked for now and the number of transactions has slowed significantly, while newbuilding contracting and price increases have also slowed in 2022.

An example of a full and very interesting report can be seen here:

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