News / Container trades back in 'pandemic-level territory' – with rates still rising

© Andrii Yalanskyi

Fresh warnings of further spot freight rate rises were issued on the first day of the TOC Europe 2024 conference in Rotterdam this week.

The Red Sea crisis and bursts of regional port congestion continue to present problems to container trades, while the looming threat of tit-for-tat tariff wars was causing demand spikes, Xeneta chief analyst Peter Sand told delegates

“Half a year ago we were looking at a 2024 that would be like taking a walk in the desert. Now, of course, everything has changed.

“Meanwhile, shippers saw the ugly face of Covid coming back and so they acted quickly, which begs the question of what happens if everyone else is shipping during the third-quarter peak season, if it looks like this now?

“This uncertainty has made spot rates explode and, I’m afraid to say, there will be another spot rate hike in mid-June, although it seems to us at the moment that the next hike will be less extreme, possibly indicating a slight improvement for shippers,” he added.

Meanwhile, Vespucci Maritime chief executive Lars Jensen was unequivocal that some container trades had, effectively, returned to the pandemic era.

“Are we in pandemic-level territory? Yes, without a doubt. It’s exactly the same. When the Red Sea crisis hit, we had overcapacity. That was pure luck. Imagine if the carriers hadn’t ordered all that tonnage – freight rates would be far higher today than they are.

“But it has also meant that now there is no excess capacity if other problems crop up, and they have – there have been massive port congestion problems over the past six weeks, such as at Singapore and in the West Med, caused by a boom in demand – again, pandemic-level territory,” he said.

Both analysts pointed to a recent surge in vessel charter costs as further evidence that carriers and owners believe the issues are likely to persist.

“It’s worth looking at carriers’ vessel costs – time-charter rates are up by 100% since mid-December and hire periods are getting longer, so clearly neither carriers nor owners see any resolution,” Mr Sand said.

Mr Jensen added that the recent return of independent carriers operating smaller vessels on deepsea trades hit by price hikes as another echo of the pandemic.

“Take the re-emergence of smaller, opportunistic carriers on the Asia-North Europe trade – Ellerman City Liners are back, doing some sailings in the summer just as they were during the pandemic, while another freight forwarder has started its own service between China and Mexico,” he said. He added that this ability of new entrants to offer extra capacity to trades refuted the criticism that there is insufficient competition in liner shipping.

And he told delegates: “There is also no sign that the Red Sea crisis will end – it could go on for another month, it could go on for another five or 10 years.

“However, if this is an early peak season, and that is what I am leaning to, the demand boom should abate by the beginning of July. But if it’s a stronger demand that goes beyond, then we could be looking at rate levels that might go above what we saw during the pandemic.”