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Freight Forwarders Expect Container Demand Recovery in 2023

Freight Forwarders Expect Container Demand Recovery in 2023

In a recent survey conducted by Container xChange, freight forwarders have expressed optimism regarding the revival of container demand in 2023. The survey revealed that 69% of respondents anticipate a rebound in demand, although 51% remain uncertain about the exact timing of the recovery. While 18% of those surveyed expect the upturn to occur within the next one to three months, 31% do not foresee any improvement in container demand throughout this year.

Surprisingly, despite the approaching peak season, container prices have remained stagnant this year. Data from Container xChange indicates that the prices of 20-foot containers in June 2023 have experienced a significant decline compared to both June 2022 and 2021.

Christian Roeloffs, the co-founder and CEO of Container xChange, addressed the current market dynamics. He noted that the supply-demand imbalance is worsening due to upcoming vessel deliveries and low scrapping rates. Although spot rates have reached pre-pandemic levels in most trade routes, contract rates continue to slide. This situation, combined with the persistently low demand, has led to an industry-wide challenge of overcapacity in both containers and vessel capacity.

Roeloffs further emphasized that the maritime industry is facing additional hurdles, including labor disruptions and the impact of the Panama Canal drought. Under normal circumstances, these factors would contribute to an increase in freight rates as they absorb effective capacity. However, the current market conditions cast doubt on the likelihood of any significant price effect.

These factors, along with the existing challenges, are expected to have an impact on any potential peak season this year. Shippers may face deteriorating supply chain reliability, potentially leading to an acceleration of order placements. Consequently, this may flatten out the expected peak season and reduce the likelihood of a freight rate increase in the second half of 2023.

While container lines do not anticipate a complete return to pre-pandemic rate levels, they continue to face the ongoing comparison of freight rates in pandemic and pre-pandemic terms. The increase in costs has resulted in raised minimum pricing. Variable costs have surged by approximately 15-25% since 2019, varying by trade lane. As a result, carriers have increased the lower limits for freight rates by the same percentages.

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This poses challenges for shippers, who now encounter higher variable costs for cargo transportation. Despite a significant decline in average container rates from 2021 to 2023, the underlying variable costs remain elevated. As a result, a substantial further decrease in spot freight rates seems unlikely, while contract rates still have room for potential depreciation.

MMJ News Desk
Author: MMJ News Desk

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