Date: Tuesday, November 29, 2022
Daily ocean container departures from China to all ports globally have taken another step down, according to data in FreightWaves SONAR Container Atlas, falling to minus-22% year over year on Wednesday.
Ocean container departures from China mounted a recovery following Golden Week — the first week of October this year — but then slipped again as weak demand abroad and renewed COVID-19 lockdowns in Guangzhou took a toll on economic activity.
The chart above sorts daily container booking data by the departure date listed in the booking. It represents volume actually departing from container terminals rather than the amount of booking activity taking place on a given day. Daily container departures are volatile, so year-over-year (y/y) comparisons based on a single day can be misleading. But the larger trend is clear: Volume pressure is significantly softer than last year.
The weaker container bookings appear to be fairly well distributed and not just limited to ports in the same region as Guangzhou, like Yantian. Bookings out of Shanghai and Ningbo also look soft.
There’s reason to believe that ocean container volumes out of China will deteriorate further before they improve. Current ocean container bookings out of China — for example, sorting ocean container shipments by the day they were booked rather than scheduled day of departure — suggests that fewer shipments are being booked in recent weeks, which will mean fewer departures going forward.
Ocean container bookings sorted by day of booking reflect daily demand pressure from shippers and their suppliers and tend to be more volatile than actual departures, which are necessarily tied to the physical capacity of departing vessels. A sudden surge of bookings on a given day will likely be scheduled to depart across several days. The sailing schedules of the steamship lines tend to smooth out short-term volatility in bookings demand.
The advantage of sorting ocean container volumes by day of booking, though, is they can serve as a leading indicator of departures, albeit a “raw” directional indicator, close to the coalface.
Significantly deteriorating demand pressure in the form of container volumes was already implied by steamship lines’ reduction of capacity from key trade lanes like the eastbound trans-Pacific, which has so far been unable to restore pricing power to the carriers. But this data confirms a bearish outlook going forward.
Mario Cordero, executive director of the Port of Long Beach in California, told CNBC he projected blank sailings amounting to 15% of its fourth-quarter inbound vessel capacity. Meanwhile, Sea-Intelligence tallied 50 announced blank sailings from China to North American ports for the final 10 weeks of 2022.
The capacity reductions on the trans-Pacific appear to be slowing but not halting entirely the drop in spot rates on the trade lane.
The Drewry World Container Index (WCI), Shanghai to Los Angeles (yellow line) has fallen to $2,130 per forty-foot equivalent unit (FEU), down 14.7% month over month (m/m). The Freightos Baltic Index Daily, China to North America West Coast (green line), which tends to be more volatile than the Drewry WCI and tends to lead it slightly, has stabilized, risen to $2,707 per FEU and is up 6.9% m/m.
What remains somewhat murky is the demand picture going forward.
To some transportation industry observers, soft volumes and weak rates in September and October were merely symptoms of a peak season that occurred earlier in the year than usual, not indications that overall freight demand was materially weakening. According to this understanding of the market, 2022’s ocean container peak season was soft because it was “pulled forward.”
On the other hand, freight demand was abnormally high for a period of nearly two years and now appears to be both slowing, due to slower economic growth — the United States posted two quarters in a row of negative gross domestic product growth in the first half of 2022 — and high goods inflation, while also normalizing because of consumers’ return to services and experiences. Rather than an “early peak,” according to this narrative, elevated container imports in the summer of 2022 were the last gasp of the COVID-19 economy’s unusually high goods consumption.
A more fundamental question revolves around how much of an ocean container spot rate’s movement can be attributed to internal market dynamics versus broader macroeconomic trends.
Some cycles are clearly driven by internal market dynamics, like overbuilding and capacity gluts. Other cycles seem to be more closely tied to shippers’ urgency to move freight in response to consumer demand signals. Often, these cycles don’t overlap and cancel out each other in a way similar to negative interference.