The current situation in the global shipping industry is complex, as container rates are experiencing a significant decline, with contract rates moving closer to spot rates. This trend is evident in different regions, such as 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.
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 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.
Furthermore, the decline in exports to the US and the EU in 2022, coupled with the increase in trade with Russia, may result in a shift in trade routes and patterns. 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, as forecasted by Container xChange.
“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 Mr. Christian Roeloffs, CEO & Co-Founder, of Container xChange.
“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 summary, the global shipping industry is facing a complex situation, with a 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.
CHINA (NORTH-EAST ASIA)
- China container trade market struggles with slow market pickup
Container volumes and rates remain low after Chinese New Year, signalling a shift in the shipping industry. By October 2022, an oversupply of containers had led to carriers wanting to offload their inventory. However, due to global inflation and restricted demand, spot rates, contract rates, and container prices have sharply fallen, with one major Asia-US route experiencing an 80% drop in freight prices.
Additionally, container rates remain low, with Asia-US West Coast rates in January 2023 being 11% lower than in January 2020 and Asia-US East Coast rates in January 2023 being 84% lower than in January 2022.
in addition to Asia-US shipping routes, consumer demand in North Europe is unlikely to improve soon. 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.
After comparing the prices of a 20-foot cargo-worthy container in the top three ports of Asia - Ningbo, Shanghai, and Singapore - to their prices in January 2022, we observed a significant decline in all three ports. 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.
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. The graph below indicates the average prices of 40-foot containers.
- China's 2022 exports to US and EU weaken, trade with Russia hits record
Despite these challenges, China recorded a trade surplus in 2022, which grew by 29.7% from the previous year. However, this growth was largely due to the strong export growth in the first quarter of the year, which slowed down as the year progressed, particularly after central banks increased interest rates to tackle inflation.
Container xChange predicts that export growth and outbound container volumes will remain low in the first quarter of 2023. While exports to the US and the EU declined in 2022, exports to Russia increased by 8.3%.
According to GAC, goods trade between China and Russia reached 1.28 trillion yuan ($190 billion) in 2022, a 30% rise from 2021, largely due to China's purchases of oil and coal from Russia. By November 2022, Russia had surpassed Saudi Arabia as China's top crude oil supplier.
On our leasing platform, we found that as of January 17, the average pick-up rate for leasing a container from Shanghai to Moscow was $832. It was $2,425 in January 2022.
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.
SOUTH-EAST ASIA
- Average container prices see a major slump of 32% Y-O-Y in South-east Asia
Average container prices in Southeast Asia sees a 32% Y-O-Y drop from $3,798 in January 2022 to 2,590 January 2023.
Pickup charges ex South-east Asia sees a dip of 78% from $311 in December 2022 to $67 in January 2023.
On the South-east Asia-US trade route, the average pickup charges dropped by a 6.38% in January 2023.
Central Asia saw a 36% rise in average container prices for trading, followed by a 5.25% increase in North-East Asia, whereas South-East Asia saw a 6.25% drop in January 2023.
