Ti Insight notes weakness in global container shipping freight rates

There are several reasons to suggest this, the company said.

Patterns of trade are changing, with the position of China as the leading origin and destination for consignments lessening and other, new location, becoming much more prominent in the container market.

The effects of consolidation of the supply side in container shipping sector, resulting in large network providers with possibly more pricing power.

Large container shipping lines are diversifying their businesses into other areas of logistics and this may affect their approach to investing in container shipping feets. They also have strong fnances.

The nature of demand seems to be changing, with fuctuations in the proportion of demand for ‘merchandise’ as compared to services.

What appears likely to happen is a return to the normal dynamics of demand and supply but with different ‘expressions’ of that demand, Ti Insight noted.

Overall however, the conditions of the global container shipping market seem to be suggesting continuing weakness in freight rates, driven in great part by a strong expansion in available container ship capacity.

The headhaul index edged up to 103.2 points in August 2023 whilst the backhaul sat at 104.7 points. Global headhaul rates are now down by 371.3 points year on year (YoY).

In monetary terms, it now costs nearly $6,000 less than a year ago to ship a fourty-foot container on a global headhaul route and over $12,000 less than August 2021.

More recent short term trends suggest that rates bottomed out at the start of Q2 2023. The headhaul index reached its lowest ever level of 90.3 in July 2023.

August followed with the first increase since March 2022. The backhaul index continues to trend downwards after being elevated during 2022.

Over the past quarter there have been clear signs that the largest container lines have been attempting to either increase, or at least end the fall, in freight rates.

In Q2 2023 the global capacity of the ocean freight market decreased by 4.1 per cent compared to Q2 2022. The trend suggests that the global capacity is on a recovery trajectory in Q2 2023, as the weekly global capacity increased by 6.2 per cent in July 2023 since its lowest in February 2023, and by 3.7 per cent since Q1 2023.

Ti’s ocean frieght confdence index has fallen overall from Q2 2023 to Q3. There is an underlying degree of volatility in the ocean freight market. Rates appear to have bottomed out which will result in smaller fuctuation in price in the coming months, Ti Insight added.

Fibre2Fashion News Desk (DS)