News / 'Peak season already over' as ocean freight rates collapse further

27/09/2023

Carriers’ efforts to stave off a rates collapse have met with marginal success over the past few months, but the crash of last week, when Asia-North Europe rates tumbled 34% to less than $996 per feu, marked an end to this.

MSI found that European demand for imports from Asia increased by some 5.9% in July, compared with a year earlier, entailing a YoY improvement in the year-to-date of 2.8%.

However, concerns over inventories still seem to be affecting the US, with Asia-US suffering an 8.3% YoY decrease in July and 13.1% in August. In general, MSI has declared peak season “already ended”.

“However, market participants have stated that seasonal demand had been progressively weakening in the past four weeks, ahead of China’s Golden Week holiday and is expected to reach a trough in level terms during that week, at the beginning of October,” MSI reported.

Meanwhile on the westbound transatlantic, where weakening demand has done little to assist carriers in absorbing a deluge of new capacity, rates have punched through the pre-pandemic floor, according to Freightos, sitting at some 40% lower than in 2019. Demand was described as “especially grim” by MSI, with a drop of 16.5% year on year in July, which MSI said would continue with “significant monthly YoY declines projected up until the end of 2023”.

Despite reports showing broadly level consumer spending in the US. “A recent analysis suggests that some spending growth is on the types of goods, like video games, that don’t ship by ocean container – another factor in the relative disconnect between spending and freight,” noted Judah Levine, Freightos’s head of research.

Mr Levine also said blanking sailings and suspending services would “only get more challenging as volumes ease and record levels of new capacity, about one vessel per day for the rest of the year, will continue to enter the global market”.

According to Alphaliner, some 30% of new capacity delivered this year has been poured into Asia-North America and 22% into Asia-Europe, with around 24% yet to be assigned. Alphaliner expects some new ships to be allocated to north-south trades between Asia and Latin America, with just under 14% set aside for this purpose thus far.

Meanwhile, scrap vessel cash buyer GMS reported “feverish” buying in the Indian sub-continent ship-recycling market, with Indian prices rising to $580 per light displacement ton (LDT), even reaching $600 in one case – proof, in GMS’s interpretation, “…that sentiments in Alang are back on track again.”

GMS said the high price paid for container tonnage by cash buyers indicated that losses were likely when selling vessels for scrap, “just for the sake of having vessels in hand to sell”.

Listen to this clip from The Loadstar Podcast on the outlook for container shipping, with Peter Sand of Xeneta.