Liner Bear Market Looms as Rates Continue to Tumble

By Mike Wackett (The Loadstar) –

Maritime analysts are bearish on the outlook for liner shipping, as inventory de-stocking progress in the US and Europe disappoints.

Indeed, MSI’s June Horizon containerships report predicts a “challenging” second half  for the sector, unless demand “picks up sufficiently to offset looming massive capacity injections”.

And it warns: “Moreover, the global macroeconomic environment is still far from favourable, with significant monetary tightening continuing, which we predict will lead to recessions in Europe and the US.”

It adds that it expects “only a small rise” in freight rates, late in the third quarter, “with risks weighted to the downside”.

UNCTAD: Positive Start, Pessimistic Outlook for Global Trade in 2023

Meanwhile, the erosion of container spot rates on the main container lanes continued this week.

Xeneta’s XSI Asia-North Europe component shed a further 5.5%, for an average of $1,240 per 40ft. This compares with a reading in the same week of last year of $10,353 per 40ft, with many shippers at the time obliged to pay considerably more to guarantee equipment and space on sailings.

And, with the three vessel-sharing alliances upgrading Asia-North Europe loops to accommodate the delivery of newbuild 24,000 teu ultra-large vessels, it is difficult to foresee any uptick in spot rates over the coming weeks.

However, the news is better for Asia-Mediterranean carriers, Maersk, for instance, saying this week that demand was “healthy” and that it was working on adding capacity to the route.

Drewry’s WCI Asia-Mediterranean reading did, nevertheless, slip 3%, to $2,075 per 40ft, although the premium for carriers servicing the route is still some $800 per feu, compared with rates to North Europe.

Commenting, Xeneta noted that spot rates between Asia and the Mediterranean were actually higher than contracts rates, which it argued was a sign of a strong market.

On the transpacific, the Freightos Baltic Exchange (FBX) Asia to US west coast component recorded a huge 15% drop this week, to $1,213 per 40ft, an average rate that is barely breakeven for even the most cost-effective carrier on the route. For the US east and Gulf coasts, the FBX reading fell by a more modest 7%, to $2,322 per 40ft.

John McCown’s analysis of container throughput at the main US container ports reported a slump of 21% for imports in May, compared with the previous year. He noted it was the eighth consecutive month of year-on-year double-digit decline in US imports.

According to the spot rate indices, the transatlantic market appeared to be stabilising this week after consecutive weeks of decline, with both the FBX and the XSI readings flat, at $2,082 and $2,050 per 40ft, respectively.

Nonetheless, according to a UK-based forwarder who contacted The Loadstar this week, the average rates are not representative of the market.

“At the moment, we are being offered at least $500 per box lower by all the major carriers,” he said, “but I’m not sure how long they will be able to sustain those rates.”

The Loadstar is known at the highest levels of logistics and supply chain management as one of the best sources of influential analysis and commentary.