No precipitous plunge in container shipping rates, just ‘orderly’ decline (2023)

There’s an old Greek shipping saying that goes: “Ninety-eight tankers and 101 cargoes, boom. Ninety-eight cargoes and 101 tankers, bust.” This doesn’t translate so well into modern-day container shipping because the consolidated liner sector manages the number of ships in service a lot better than the fragmented tanker business.

Tanker spot rates can plunge violently lower when supply exceeds demand. One of the big questions for container shipping has been: Will spot rates plunge precipitously after demand pulls back, as it has in the past in bulk commodity shipping? Or will there be a gradual decline toward a soft landing?

So far, it looks gradual. Trans-Pacific rates have steadied in July and early August. In fact, some indexes show spot rates ticking higher again.

Spot rates are at least temporarily plateauing because U.S. import demand remains above pre-COVID levels, some U.S. ports remain extremely congested, and ocean carriers are “blanking” or “voiding” (i.e., canceling) sailings, both because their ships are stuck in port queues and because they’re matching vessel supply with cargo demand to avert the fate of Greek tanker owners.

“Void sailings are still the go-to options for carriers at this point to try and stymie the fall in rates,” said George Griffiths, managing editor of global container freight at S&P Global Commodities.

“Congestion is still the buzzword for East Coast ports, with Savannah currently feeling the full force of loaded imports and associated delays,” he told American Shipper.

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FBX trans-Pac rates up 3% from recent lows

Different spot indexes give different rate assessments but generally show the same trends. The Freightos Baltic Daily Index (FBX) Asia-West Coast assessment was at $6,692 per forty-foot equivalent unit on Friday.

The good news for shippers booking spot cargo: That’s just one-third of the all-time peak this index reached in September. The bad news: Friday’s assessment is up 2.7% from the low of $6,519 per FEU hit on Aug. 2, and it’s still 4.5 times higher than the rate at this time of year in 2019, pre-COVID.

No precipitous plunge in container shipping rates, just ‘orderly’ decline (1)

The FBX Asia-East Coast spot rate assessment was at $9,978 per FEU on Friday, less than half the record high in September. However, it was up 3.5% from the recent low of $9,640 on Aug. 2 and still 3.6 times higher than 2019 levels.

No precipitous plunge in container shipping rates, just ‘orderly’ decline (2)

Drewry indexes show gradual slide

The weekly index from Drewry portrays a gentler descent than the FBX, because Drewry did not include premium charges in its spot assessments at the peak.

Unlike the FBX, Drewry’s Shanghai-Los Angeles assessment does not show a recent uptick. It was at $6,985 per FEU for the week announced last Thursday, its lowest point since June 2021. It was down 44% from its all-time high in late November 2021, albeit still 4.2 times higher than rates at this time of year in 2019.

No precipitous plunge in container shipping rates, just ‘orderly’ decline (3)

Drewry’s weekly Shanghai-New York assessment was at $9,774 per FEU on Friday. Rates were relatively stable over the past two week, yet the latest reading is the lowest since June 2021 and down 40% from the peak in mid-September.

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Drewry’s Shanghai-New York assessment on this route is still 3.5 times pre-COVID levels.

No precipitous plunge in container shipping rates, just ‘orderly’ decline (4)

S&P Global: East Coast rates 50% higher than West Coast

Daily assessments from S&P Global Commodities (formerly Platts) show a widening divergence between North Asia-West Coast and North Asia-East Coast Freight All Kinds (FAK) rates.

S&P Global assessed Friday’s North Asia-East Coast FAK rate at $9,750 per FEU, up 2.6% from the recent low hit on July 29. Spot rates on this route have roughly plateaued since late April, according to this index.

S&P Global put Friday’s North Asia-West Coast rate at $6,500 per FEU, still gradually falling and at the lowest point since late June 2021. The gap with East Coast assessments has been widening since May, with the East Coast rates now 50% higher than West Coast rates.

No precipitous plunge in container shipping rates, just ‘orderly’ decline (5)

“East Coast rates are significantly higher than West Coast rates due to the congestion we are seeing,” said Griffiths.

Port congestion still very high

Matthew Cox, CEO of ocean carrier Matson (NYSE: MATX) explained on his company’s quarterly call earlier this month: “In fall of last year, we saw over 100 vessels waiting at anchor or offshore waiting to get into the ports of Los Angeles and Long Beach. We still have 100 ships waiting. But a lot of that congestion has moved into different ports. We [have] the same number of ships but just more distributed to different places.”

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The number of ships waiting off all North American ports topped 150 in late July, according to an American Shipper survey of ship-position data from MarineTraffic and queue lists for Los Angeles/Long Beach and Oakland, California.

The count fluctuates by the day (and by the hour as ships enter and leave queues) and is now down 15% from its peak — but still historically high. As of Monday morning, there were 130 ships waiting offshore. East and Gulf Coast ports accounted for 71% of the total, with the West Coast share falling to just 29%.

The queue off Savannah, Georgia, was the largest at 39 ships on Monday morning. It was considerably higher just a few days earlier. According to Hapag-Lloyd, there were 48 container vessels off Savannah on Friday, with wait times of 14-18 days.

The queue off Los Angeles/Long Beach has now virtually vanished. On Monday morning, it was down to just 11 container vessels, according to the queue list from the Marine Exchange of Southern California. It hasn’t been that low since November 2020. It hit a high of 109 ships on Jan. 9.

Spot rate easing expected to continue

On last Wednesday’s quarterly call by ocean carrier Maersk, CFO Patrick Jany said port congestion preempted a steeper drop in spot rates. Even with support from congestion, he predicted short-term rates will decline further in the months ahead.

“We have seen an erosion of short-term rates in the past few months that has been stopped here and there by renewed or new disruptions,” Jany said. “The erosion of the short-term rates will continue. It won’t be a one-day drop but a progressive erosion toward a lower level of short-term rates in the fourth quarter.”

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Jany predicted that when rates stop falling, they “will stabilize at a higher level than they were in the past [pre-COVID] and higher than our cost level.”

During the latest quarterly call by logistics provider Kuehne + Nagel, CEO Detlef Trefzger predicted rates would ultimately settle at levels two to three times pre-COVID rates. A Seko Logistics executive made the same prediction during a recent briefing.

According to Cox at Matson, spot rates “are adjusting slowly. There’s no falling off a cliff. The word we use is ‘orderly.’ We’re seeing rates decline from their peak, but … we expect an orderly marketplace for the remainder of the year, with our vessels continuing to operate at or near capacity.”

Click for more articles by Greg Miller

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FAQs

Is the price of shipping containers going down? ›

These pressures will continue to drive down container costs in the short- and mid-term, according to Container XChange analysis, which shows that U.S. container prices have declined as much as 30% in the past two months along both coasts, and by as much as 50% at some ports compared to 2021.

Why has the cost of shipping a container gone up? ›

Truck drivers and ship crews couldn't cross borders because of public health restrictions. Pent-up demand from huge stimulus programs during extended lockdowns overwhelmed the capacity of supply chains. Besides causing delays in getting goods to customers, the cost of getting them there surged.

How long will the container crisis last? ›

Outlook for 2022:

The shadow of Covid-19 was still hanging over the start of 2022 as the Omicron variant spread throughout the world. No one really knows when the pandemic will end. However, shipping industry insiders say soaring freight costs and port congestion could last for many more months, perhaps into 2023.

Why has the price of shipping containers gone up in China? ›

Every spot on an available container in China has a massive price surcharge to reflect the heightened demand in the market.

Will shipping prices go down in 2022? ›

After a year in which freight rates continued to set new highs, spot rates are on the decline in 2022 with experts pointing to a series of factors likely contributing to an ongoing decline.

Are shipping costs from China coming down? ›

The huge increase in freight costs that began during the early stages of the pandemic is beginning to unwind, with rates for shipping containers from China to the US Pacific coast halving over the past two months.

How much does a container ship cost 2022? ›

According to the latest data from Xeneta, Asia-U.S. contract rates are up 122% from 2020, pre-COVID, with bids in early negotiations of 2022 contracts averaging $5,700 per forty-foot equivalent unit.

How much have freight costs increased in 2022? ›

Year-over-year changes in freight rates in 2022

Shipments, freight moved by companies, increased by 0.4% year over year, according to the report, but declined nearly 2% month over month.

Why are shipping rates so high 2022? ›

The primary reason for this increase is the world's nemesis: COVID-19. The pandemic has destroyed the global supply chain since 2020. And the recent rise in shipping prices is a direct reflection of that.

Is the shipping crisis getting better? ›

“So we are saying we expect quite a strong first half of 2022, and then we expect what we call a normalization early in the second half.” That view added a glimmer of optimism in an industry bogged down by labor shortages, port congestion and COVID-related disruptions.

How much does it cost to bring a 40 foot container from China? ›

The average price to ship a 40-foot container from China to the U.S. West Coast ports increased from $1,500 at the start of 2020 to over $20,000 in September 2021 (the average price includes premiums and surcharges). By the end of 2021, the rates started to drop, but only to $15,000.

Is shipping going to get worse? ›

Answer: The consensus is until 2023.

If you haven't tried to have anything shipped to your home in the last few months, it may have escaped your notice that the U.S. is currently experiencing a shipping crisis.

Why is there container shortage in China? ›

The problems associated with the shortages grew at the same speed as the COVID-19 virus. As the pandemic rapidly spread—first through China, then across the world—it triggered waves of lockdowns, stalled production and shuttered manufacturing facilities. It also resulted in a big buildup of empty containers at ports.

How much does a container ship cost 2022? ›

According to the latest data from Xeneta, Asia-U.S. contract rates are up 122% from 2020, pre-COVID, with bids in early negotiations of 2022 contracts averaging $5,700 per forty-foot equivalent unit.

How much does a 40 ft container cost? ›

The cost of a 40ft container will depend on the location, current supply and demand, and the condition of the box. In the US, you're looking at around US $3,956 for a standard 40ft, and in India around US $6,101.

Why are shipping costs so high 2022? ›

The primary reason for this increase is the world's nemesis: COVID-19. The pandemic has destroyed the global supply chain since 2020. And the recent rise in shipping prices is a direct reflection of that.

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