Container demand remains weak as peak season begins
Container prices continue to decrease in light of depressed demand
While a surge in container prices would normally be expected in the run-up to the peak season, this has yet to materialise. The average price of 20ft dry containers in New York has fallen by 82% to $1,175 in June 2023 from its peak of $6,500 in June 2021. Similarly, prices in Long Beach have fallen by 65%.
A survey of the global freight community in May this year, conducted by Container xChange, showed that while 69% of respondents are looking to a return of container demand in 2023, only 18% consider it likely in the short term (1-3 months).
The industry is troubled by overcapacity of containers and vessels that may become worse as newly ordered ships are commissioned into global fleets.
As a result, container shipping lines are now sailing their largest vessels at a far slower rate than during the pandemic in an attempt to cut costs and capacity. In Q1 2023 vessels were going at some of the slowest rates recorded at a little under 14 knots, resulting in capacity being cut by 6% according to a shipping analyst from BIMCO.
Consumer demand also appears to be weaker than in previous years. In the United States, the National Retail Federation reports slowing sales. As a result, US container imports are likely to remain weak. Declining consumer confidence and reduced consumer spending power as a result of changing monetary policy and inflation are the central drivers behind this weakness.
Shippers now face higher variable costs for transporting their cargo.
Christian Roeloffs, CEO and co-founder of Container xChange, said: “Despite the significant decline in average container rates from 2021 to 2023, reaching almost 85% reduction, the underlying carriable costs remain elevated – which makes a significant additional and sticky decrease in spot freight rates unlikely, while contract rates still have room for further depreciation.”