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Container rates tumble but…

[ March 29, 2023   //   ]

Deepsea containerised cargo volumes fell a further 2.5% during the final quarter of 2022 during what is traditionally the peak season, said the Global Shippers Forum and consultants MDS Transmodal in their latest Container Shipping Market Review.

GSF secretary general James Hookham said that volumes have fallen steadily in the early weeks of 2023 and world trade continues to stumble as economies grapple with persistent inflation and high energy prices, suppressing consumer demand in nearly all sectors.

He commented: “This has stopped being just a supply chain or a shipping issue and shippers and carriers are firmly in the hands of global economic forces which are themselves responding to structural weaknesses in economies and to geopolitical tensions.”

Predicting volumes and inventory requirements for the remainder of the year had become “a leap into the unknown for many shippers, as few but the most experienced will have encountered so varied a mix of influencing factors”.

With interest rates still high and Central Banks hinting they could go higher still, the inflationary effects of the Covid crisis and the crunch on consumer spending is lingering into the second quarter this year, the report said.

While many carriers and service providers are anticipating a recovery in demand in the second half of the year, this is more in hope than expectation, said the report’s authors. There are few economic signals to support such optimism, they said.

The arrival of new shipping capacity, an apparent questioning of the benefits of shipping alliances and an inevitable reduction in utilisation of vessel space, is also changing the shape of the supply side of the equation in container shipping.

While shippers have undoubtedly benefitted from the dramatic fall in spot rates over the past nine months, with many routes back to pre-Covid levels, they may be more concerned about weak demand for their products.

Shippers have also been enjoying have seen a sharp improvement in port call predictability with a significant improvement over the third quarter of 2022.

James Hookham concluded: “This time it’s certainly different. How shipping lines respond to weak demand, manage existing surplus capacity, deploy new vessels and maintain port schedules, all in a year when every existing ship is being assessed for its overall fuel efficiency, will remain a key focus for our monitoring. The dollar value of rates may look the same as 2019, but the market conditions are utterly different and even less predictable.”

MDS Transmodal chairman, Mike Garratt, commented: “Demand clearly fell while shipping line capacity grew marginally, improving shippers’ negotiating positions. Performance generally improved as rates fell and the return of more multi-regional services improved connectivity between markets.

“However, mean revenues per TEU remained high relative to costs as a consequence of the contract rates agreed the previous year, which is reflected in published liner company results for 2022. Several consortia continued to enjoy market shares of above 30%.”

Meanwhile, inventory management software provider Unleashed described UK manufacturers as “dangerously on 29 March.

The Cash Flow and Overstock report, by inventory management software provider Unleashed, analysed 381,000 products, ingredients and components stocked by over 1,800 firms across the UK, North America, Australia and New Zealand.

The most overstocked sector was Sport, Entertainment, Recreation, at £152,870, followed by Electrical and Electronic Components (£136,041), Furniture, Fixtures, Home Furnishing (£122,786) and Health, Medical Supplies and Equipment (£116,934).

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