Container ship freight rates fell to three-year lows! Freight volume plummeted!

Inflation has depressed consumer demand, with both container volumes and freight rates falling to three-year lows.

According to data from the American research company Descartes Datamyne, the volume of container shipping from Asia to the United States in December 2022 will be 1,319,010 TEU, a year-on-year decrease of 23%, and the decline has further expanded from November's 21%.

The volume of container shipping from Asia to the United States fell for the first time in more than two years in August last year, and then the decline continued to expand. Since October last year, the decline has been more than 20% for three consecutive months. For the whole year of 2022, container shipping volume will decrease by 4% year-on-year to 19,646,253 TEUs, which is the first year-on-year decline in the past three years.

According to industry insiders, due to rising prices, the purchasing power of European and American consumers has declined, the demand for general consumer goods has weakened, and the volume of goods has been sluggish. Among the various items, the transportation volume of furniture dropped sharply compared with summer, and decreased by 28% year-on-year in December. In addition, during the peak season in the fourth quarter, the monthly shipment volume of toys plummeted by 50%, and the three-month total was even lower than the same period before the 2019 epidemic.

On the other hand, the port congestion problem due to lack of manpower at the port before the first half of last year gave many retailers the experience of hoarding inventory. However, after the supply chain chaos tends to ease in the second half of 2022, signs of inventory surplus have strengthened. The need to secure inventory also comes to an end.

In terms of loading locations, container traffic from China to the United States, which accounts for the highest proportion, will decrease by 30% year-on-year between October and December 2022, dragging down the overall traffic volume. Urgent cargo demand ahead of the Chinese New Year holiday was also weaker than in previous years.

A director of Japan's Ocean Network Union Shipping (ONE) revealed that as demand in Europe and the United States cools down, some factories in China will be shut down for longer than before during the Spring Festival this year. Industry insiders also expect that the container shipping market is unlikely to pick up in February. Although U.S. consumer spending has not yet entered a state of negative growth, retailers are suffering from excess inventory, making it difficult for transportation demand to rebound comprehensively.

Affected by cooling demand, container freight rates have continued to fall since the second half of last year. As of February 3, the Shanghai Export Containerized Freight Index (SCFI) has fallen to only 1006.89 points, facing a thousand-point defense battle. Among them, the freight rate of the Far East to Europe line fell below US,000 to US1/TEU, the freight rate of the US-West line dropped to US,363/FEU, and the US-East line dropped to US,706/FEU, almost returning to the level before the outbreak.

In order to improve the relationship between supply and demand, some shipping companies are continuing to tighten the supply of shipping space, and some smaller shipping companies that started to engage in Asia or Europe to export to the United States during the period of soaring freight rates have withdrawn from the market due to falling freight rates.

Also affected are container prices. In December 2022, the price of a new 20-foot standard container fell to US,000, the lowest since January 2020, and only about half of that in June 2021. Considering that shipping companies may no longer order new containers and the cost of steel materials has fallen, the price of containers may continue to fall to around US,500 in the future.

However, in January, U.S. container imports posted their highest month-on-month increase since last May, according to the latest data from Descartes. Compared with December last year, imported cases in January this year increased by 7.2% to 2,068,493 TEU, almost on par with the figures for January 2019 and 2020. At the same time, in January this year, the volume of containers imported from China increased by 75,359 TEU compared with December last year, accounting for 70.7% of the increase in US imports in that month.

Chris Jones, executive vice president of industry and services at Descartes, pointed out that in the second half of 2022, the decline in imports from China led to an overall decline in U.S. imports, a trend that reversed in January.

Imports are expected to be weak in February, according to the port tracker report jointly released by the National Retail Federation (NRF) and Hackett Associates. The report expects the throughput of the 12 US ports it covers to be 1.57 million TEU in February, down 26% year-on-year, the lowest month since May 2020. The report has just lowered its forecast for imported cases from January to May by 3.5%.

The report estimates that U.S. import cases in the first half of 2023 will drop 19.4% from the first half of 2022, when imports hit a record high. On a positive note, March-June import case volumes are expected to be higher than 2018-2019 levels.

Jones said, "The economy is a key factor in the growth of container imports, but it is still impossible to predict the outlook. Although the logistics indicators released by Descartes in January show some stability, the global supply chain in 2023 still faces challenges."