Ocean Freight Trends & Capacity Overview-2023

The global economy seems to be facing challenging times as we look forward to 2023. The main engines of global growth, including Europe, US, and China, are experiencing weakening activity. Rising interest rates and the Russia-Ukraine war continue to weigh on economic activity. Even as China’s recent reopening has paved the way for a revival, the rate of recovery is not expected to be faster. Large economies like Europe and the US are still grappling with fears of a possible technical recession, which is likely to significantly impact the demand.

The global growth is expected to fall to 2.9 per cent during the year but will rise to 3.1 per cent in 2024. Global inflation, on the other hand, is expected to fall to 6.6 per cent in 2023 and 4.3 per cent in 2024, still above pre-pandemic levels. Freight rates touched the peak, nearly three-fold, during the Covid pandemic period 2019 -2021. To add to the troubles, in March 2021, the Suez Canal was blocked for six days by the 400-metre long 20,000 TEU container ship – Ever Given that had run aground in the canal. However, with economic activities resuming and the supply of containers gaining momentum, freight rates started declining.

Transpacific rate

Throughout Q4, transpacific rates continued to decline substantially. These shrinkages in the prices put the January 2023 rates 33.1 % below the pre-pandemic levels in comparison to January 2019. The Asia-US West Coast rates in January 2023 were 11 per cent lower than in January 2020 and the rates from Asia to the US East Coast in January 2023 were 84 per cent lower than in January 2022.

The volume of the four major ports (Los Angeles, Long Beach, Seattle/Tacoma, and Oakland) on the West Coast averaged around 1.7m TEUs per month in Q4 2022 which is 5.8% below the average of 1.8m TEUs per month in Q3 2022. The volumes have declined by 17.3% year-on year. Though there has been a significant drop in the overall volumes from West Coast, the volumes in Los Angeles have seen an increase since November by 14%. The capacity on the transpacific lane has significantly dropped in the last quarter of 2022. The decrease in consumer demand and the cancelled sailings from Asia to the West Coast have caused such radical cuts. However, with the congested ports in the US easing and import volumes stabilizing, container rates should begin to normalize towards the latter part of 2023.

Asia Pacific to Europe rates

Rates on the China/East Asia-Europe Lane have dropped significantly over the past few months, reaching a 47.9% decrease from its October 2022 levels. With the average cost of a 40-foot container shipment from China/East Asia to Europe at $2,845 in January, which is $2,619 less than in October 2022. The European ocean freight market demand shows a glimpse of recovery after 14 consecutive months of falling consumer demand.

Highlights

Source: Container News, Logistics & SCM