‘No Sign of Revival’ for Slumping Container Prices

Date: Thursday, July 20, 2023
Source: Sourcing Journal

Container prices have fallen for the past year and could slip even further into the late-summer peak shipping season. But analysts are watching how July plays out to see where prices go.

When maritime research consultancy Drewry surveyed importers in late May, it found that buyers expected spot rates to fall in June and maintain or rise slightly in July.

Spot rates followed the expected trend from June 1-29, declining 11.2 percent month-over-month to $1,494.46 per 40-foot container, according to Drewry’s World Container Index (WCI).

The first week of July saw rates dip 1.3 percent to $1,474.32, before inching up 0.9 percent to $1,488.13 as of July 13.

Rates are expected to stay in that range, and Drewry doesn’t see container prices perking up anytime soon.

“We thought the bottom would have been reached in June and July would be the rebound. But now it’s July and we’ve already seen a further reduction [in week one],” said Philip Damas, managing director, head of Drewry Supply Chain Advisors. “In August, we don’t expect to rebound yet, so maybe the rebound will be later.”

When compared to peak pandemic totals, spot rates have fallen dramatically as people buy less stuff to deal with macroeconomic concerns. The WCI said spot rates per 40-foot container dropped by 78.7 percent annual to $1,488.13 when compared with the same week last year.

The Drewry numbers, which assess container costs for eight major East-West trade lanes, are now 86 percent below the peak of $10,377 reached in September 2021.

Hand in hand with falling freight rates, Damas noted that Drewry isn’t seeing a recovery of container volumes from Asia to the U.S. that it expected.

“We see a reduction of volumes from last year, which continues and this is something undermining the market,” Damas told Sourcing Journal. “As a result, instead of increasing, the spot rates have continued to decrease to the point where they are now not only much lower than last year, but they are lower than pre-pandemic December 2019 levels.”

Online container logistics platform provider Container XChange paints a more dramatic picture of peak season forecasts.

“The year 2023 started with significant oversupply of containers and high uncertainty in the market—which led to substantial rate erosion,” said Christian Roeloffs, co-founder and CEO of Container XChange. “The average container prices have been freefalling and there are no signs of revival as we approach the busiest period in the shipping industry. It is quite evident that the peak season is almost invisible.”

According to the Container XChange Global Container Market Forecaster, June 2023 marked the lowest average prices for container entering U.S. and China ports, when compared to the same month in 2022 and 2021.

On a two-year basis, average prices at the Port of New York and New Jersey tumbled 79.6 percent to $720 per container, the steepest drop among those tracked. Meanwhile, prices dipped 47.5 percent to $1,243 at the Port of Los Angeles and 38.8 percent to $2,366 for the Port of Long Beach.

While 65 percent of 900 freight forwarders surveyed by Container XChange in July said that business has slowed in the second quarter of 2023, roughly the same amount (64 percent) hope business will improve in the third quarter as the peak season approaches.

Nearly half (47 percent) of freight forwarders say customer demand and customer activity fell in June, the survey said.

Many Drewry clients are trying to “squeeze their logistics budget as much as possible” to offset losses elsewhere, according to Damas. He said importers are prioritizing cost-savings on freight wherever they can.

“We find that some companies are doing better, having the short-term tactical way of buying ocean freight and transportation instead of committing to year-long fixed rate contracts,” Damas said. “There’s a sort of change in mentality. In the past, if you bought under contract and you committed larger volumes, you would get lower transportation rates. Now it’s the reverse. If you don’t commit anything to go to a short-term agreements or even a spot agreement, you’d save no money.”


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