Container demand is unlikely to bounce back until 12 months from now or longer, according to a recent report from container logistics platform Container XChange.
This year’s cautious consumer spending is likely to extend into 2024, according to the report, which pointed to Walmart and Target executives voicing concerns that consumers are having a tough time with high interest rates.
Weak demand this year is reflected in Drewry’s Port Throughput Index, which indicated that total volume at 340 global ports was down 0.1 percent in August when compared to the year prior. Container shipping giant Maersk reflected this data in its quarterly report, indicating that annual worldwide container volume performance would fall by as much as 2 percent this year.
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Low container demand keeps freight rates down too.
Drewry’s World Container Index, which measures spot freight rates across eight major global trade routes, fell by 2 percent to $1,469 per 40-foot container as of Thursday. On a year-over-year basis, the index has dropped by 43 percent when compared with the same week last year.
In a survey with industry stakeholders including shippers and ocean carriers, Container XChange said that 43 percent of respondents expect low-profit freight rates to continue into 2024, up from the 36 percent who think they will rise again. Another 21 percent is uncertain.
Container XChange said low demand has also led to a surge in empty container stockpiles.
“Regarding port pairs, we continue to observe areas with a shortage of containers. Customers are requesting extended container stays, which is affecting the number of voyages we can carry out with our equipment,” said Josilene Mattos, senior global account manager, Hapag-Lloyd, in the report. “We anticipate a stable demand for 2024 and a more balanced market supply, primarily driven by evolving environmental regulations that will influence the availability of services, as most companies will be adjusting to the new policies.”
Container depots are struggling with the oversupply of containers, with 63 percent of survey respondents saying they expect depots to stay congested in 2024. Twenty-seven percent expect the year to start with congestion before clearing up, while another 10 percent don’t expect any congestion.
On top of congestion concerns, major ocean carriers expect that new ship construction and deliveries will create an oversupply of vessels. Across 11 top carriers, 2.48 million 20-foot equivalent units (TEUs) of shipping capacity was set for completion in 2023, but that number will jump to 2.95 million TEUs in 2024, Container XChange said, reporting data from shipping research tool and database Alphaliner.
More vessels more than likely means more blank sailings, according to the survey respondents. Sixty three percent say they expect more blank sailings in 2024, with 28 percent anticipating the same amount as 2023. Only 9 percent expect a decrease, Container XChange says.
Alongside the blank sailings, container availability is likely to remain highly imbalanced in 2024, the report said. As Europe grapples with its own ongoing economic crisis, facing declining trade and subsequently, a drop in container trade, the region is struggling with the challenge of surplus containers causing repositioning costs exceeding the cost of the containers themselves.
“We have a poisonous mix of severely imbalanced container trade with a high level of excess inventory in Europe, and at the same time unreliable shipping services, suddenly lacking the vessel capacity to reposition empties out which in turn makes the situation even more difficult,” said Christian Roeloffs, co-founder and CEO, Container XChange, in the report.
The vessel surplus could also trigger intense competition among carriers, once again leading to more price reductions that may adversely impact their long-term profitability.
Major ocean carriers have felt the brunt of falling prices. Maersk’s revenue tumbled nearly 47 percent to $12.1 billion while net income fell 94.5 percent to $8.8 billion. Similarly, revenue for Hapag-Lloyd declined 55 percent in the quarter to $4.5 billion, while net income nosedived 94 percent to $293 million.
When asked by Container XChange about business performance in 2023, responses were mixed among shippers and ocean carriers. While 37 percent called it an average year, nearly as many (36 percent) said it was below average. Above average came in at just 27 percent.
With that in mind, recovery next year isn’t going to be easy. Fifty-seven percent of carriers expect to struggle with recovering demand in 2024, compared to 33 who expect they’ll be okay. The remaining 10 percent are uncertain.
