Container demand is sinking as cash-strapped consumers encounter persistent inflation, sending container prices plummeting as a result. This trend is evident in the freight rates on some shipping routes, which are now back to pre-pandemic levels. According to container logistics platform provider Container XChange, container prices from Asia to the U.S. West Coast in 2023 were 11 percent lower than they were three years ago during January 2020. In an example of the rapid decline in prices over the past year alone, January’s Asia-to-U.S. East Coast container rates were 84 percent lower than in the same month last year.
The declining rates extend to European shipping routes as well, with a 40-foot high cube container headed for Northern Europe from Asia costing approximately $823 in January, down from an average pickup charge of more than $3,000 in the year prior. With the dip in demand, more blank sailings are expected, as Ocean Alliance members CMA CGM, Cosco, OOCL, and Evergreen have cancelled 53 Asia-Europe westbound sailings scheduled from Jan. 1-Feb. 17.
If the demand falls further in the wake of the Chinese New Year, more such blank sailings can be expected, and as per Container XChange, blank sailings in Northern Europe increased by 715 percent when compared to figures from 2019. With the current trend in container prices and declining demand, we need to look at the factors that are affecting container demand, which sectors are most affected, and the future implications of this trend.
The worldwide port freight processing slowness and price declines have a significant impact on China's entire container trade business, which is anticipated to be difficult in 2023. The General Administration of Customs (GAC), an administrative government body in China, reports that the country's exports in December decreased by 9.9% from the same month last year, which was the worst year-over-year decline since February 2020. The nation's imports decreased by 7.5% during that month.
"Container trends are a key indicator of economic growth and international commerce, and the market forecast at the moment is dismal. According to Christian Roeloffs, CEO and co-founder of Container XChange, "container pricing and lease rates are falling, with the worldwide shipping sector seeing a freefall in container rates." "The blank sailings have not been able to stop the prices from falling, and the industry's mid-term projection shows a downturn in container activity on the trade routes from Asia to the European Union and Asia to America. Contract rates, on the other hand, are more similar to spot rates than usual, showing a lack of interest in making long-term commitments, which is likely the result of market uncertainty.
Ningbo, Shanghai, and the Port of Singapore, which make up the top three busiest ports in Asia, were all found to have comparable year-over-year drops in 20-foot container (TEU) prices, according to Container XChange.
The average cost per container declined by 48 percent in Ningbo, from $2,460 to $1,290, by 46 percent in Shanghai, from $2,370 to $1,270, and by 49 percent in Singapore, from $2,410 to $1,240.
Even in the last few months alone, container costs from Asia have significantly decreased, with the average market price of a single TEU from Northeast Asia falling by 9% from $1,873 in November 2022 to $1,701 in January 2023. TEUs from Southeast Asia decreased by 12 percent, from $1,871 to $1,642, during that time.
According to Roeloffs, "Intra-Asia commerce is exhibiting some resilience, with somewhat greater demand for containers." "Despite this, the mid-term prognosis does not anticipate a surge in demand to the high levels seen in 2020 and 2021, with the possible exception of an inventory replenishment cycle that would result in some demand for containers. In certain parts of the world, container rates are down and supply is growing, which is a sign of weak demand and weaker economic development.
In its most recent research, Where Are All the Containers?, Container XChange forecasted that when port congestion in the U.S. eases and import volumes stabilize, container rates would start to normalize before the end of 2023.
For the time being, as prices decline, so does the belief that commerce will follow.
Global marine commerce only increased by 1.4 percent last year, according to the United Nations Conference on Trade and Development (UNCTAD), and is projected to increase by 2.1 percent year until 2027. This is less than the 3.3% yearly increase that has been observed on average over the previous 30 years.
Trade between China and Russia increases
Even while global commerce may be slowing down, one market may benefit unexpectedly, especially given the fact that China's exports to the U.S. and the EU are declining. Imports from China increased by 8.3 percent to Russia in 2022.
As trading partners, the two markets are becoming closer. According to GAC, China's imports of coal and oil from Russia increased the value of products transferred between China and Russia by 30% from 2021 to 1.28 trillion yuan ($190 billion) in 2022.
The average pickup rate for hiring a container from Shanghai to Moscow as of January 17 was $832, down 66% from $2,425 in January 2022, according to the Container XChange leasing portal. Importantly, the majority of the reduction occurred from January to September 2022, when the average price per TEU was $898. Since then, the cost of containers from Shanghai to Moscow has decreased by 7%.
