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Will the H1 Boom Continue in H2 of 2024 for the Container Logistics Industry?

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Will the H1 Boom Continue in H2 of 2024 for the Container Logistics Industry?

Container xChange, the leading digital marketplace for container trading and leasing, has released its mid-year container market forecaster. The analysis delves into container price developments in H1 2024 and offers a market outlook for H2 2024.

Read also: May 2024 U.S. Containerized Imports Break 2.3M TEUs

“As we move into July, we’re seeing a continued rise in freight rates, container prices, and leasing rates, driven by ongoing geopolitical tensions and resulting supply chain disruptions. The diversions around the Cape of Good Hope and the resulting congestion in major ports have created a perfect storm, causing importers in the US and Europe to pull forward orders in H1 typically reserved for Q3. This has led to a notable supply-demand imbalance. While we might see a peak in July followed by a reduction in freight rates due to easing congestion and reduced demand, the ongoing conflict in the Middle East and potential new disruptions, such as labor strikes, could prolong these challenges. The container shipping industry remains on high alert, adapting to an ever-changing landscape.” Inferred Christian Roeloffs, cofounder and CEO, Container xChange

H1 2024 Container rates Recap

Globally, shipping costs have surged in the first half of 2024, defying the traditional off-season lull

Asia and Middle East and ISC region were the regions that witnessed a significant uptick in container prices since October 2023 due to the Houthi attacks.

On the other hand, container prices remained stable or decreased, reflecting an abundance of containers in traditional import destinations. These prices have now begun to move upwards. Our mid-year forecaster gives a review of global container price developments to offer greater visibility into the trends observed during the first half of the year.

Main destinations that experienced significant container price upticks in H1’2024 

Average container prices continue to rise through May and in June. Hong Kong and Vietnam experienced the biggest month on month percentage spike of 35% from May to June for trading containers, followed by China (27%), Russia (24%), Taiwan (23%) and Malaysia (23%). 

India also faced a rise in average container prices spiking by 21% from May to June 2024. In Singapore, while there has been a steady rise of 31% in container prices since October 2023, the increase from May to June 2024 was a more moderate 7%.

In terms of the impact of the Houthi attacks, China stood out by a significant leap at 78% container price hike from October’23 to June’24, followed by Hong Kong (77%), Spain (42%), Uzbekistan (40%) and Thailand (35%). 

Malysia (29%), Netherlands (29%), Taiwan (28%) and Vietnam followed the pack of biggest price increases since October for container prices. (40 ft high cube, cargo worthy containers)

global trade container

China and Hong Kong have the highest average container prices currently across the world, namely, $3600 and $3124, respectively. 

Region-wise analysis of Impact of Houthi attacks on container price development

To understand the trajectory of container prices development, it becomes important to study the impact that Houthi attacks have had on these. Here is a region-wise impact analysis on the container prices pre-Houthi attacks and until June 2024. 

global trade container

Northeast Asia region witnessed the biggest price increase of 69% since October 2023, with China, Hong Kong and Taiwan registering significant price hikes, indicating robust demand for containers.  

Container prices have been on an upward trajectory across Central Asia, the Middle East, the Indian Subcontinent (ISC) region, Japan and Korea and both Northeast and Southeast Asia. 

Tony Yu, president, Baiscon Shipping Line Hong Kong Co., Limited with the company headquartered in China and one of our top sellers in the US shared exclusive insights from the ground.

“From January to June of 2024, containers in the North American market were in a state of clearing inventory and prices showed signs of rising. It will continue to rise in the next few months, which is in line with the increase of container purchase price in the Chinese Mainland. The high cost of container procurement and container leasing lead to almost no difference between SOC freight and COC freight. Based on this performance, the lack of containers in some cities in North America is inevitable, which will drive up the sales price of containers.”

Looking into the second half of 2024, Tony expressed optimism tempered by practical challenges.

Discussing significant market drivers and developments for the second half of 2024, Tony emphasized, ” We need to consider several factors that affect the market: the Red Sea crisis and the subsequent diversions and the situation of China’s own foreign trade exports. If the situation does not improve, it will lead to strong container sales in North America. However, the influence of exchange rates cannot be ruled out. Should the Federal Reserve lower interest rates, the resulting appreciation of RMB could potentially have an auxiliary effect on the stability of container prices. Personally, I feel that there will not be too much change in the second half of the year”

Building on these insights, Daniel Nee, President of Holyidea Logistics Equipment Manufacture Co., Ltd., (a Container xChange customer based in China) emphasizes the ongoing complexities and unpredictability in the global landscape as pivotal factors which will continue to influence the container industry in the second half of 2024. 

“As we look ahead to the second half of 2024, the global situation remains highly complex and unpredictable, leading us to anticipate further challenges in the container industry. The most significant factor shaping the market will be the geopolitical risks, and we must wait for changes on the global stage before making any definitive industry judgments. My advice to peers is to approach the market with patience and resilience. We are preparing for these uncertainties by waiting quietly and observing the evolving global context.” 

Container market remains bullish of further price hikes

global trade container

The first half of 2024 saw the Container Price Sentiment Index (xCPSI) reach an all-time high, and it remains elevated throughout the last six months, indicating a strong sentiment for rising container prices expectations in the upcoming second half of the year.

United States: Container demand spikes, container prices begin to rise

“In recent months, the US container trading market has significantly slowed, primarily due to sharp price increases. Container sellers in the US have held onto stock, anticipating higher prices, while container buyers in US have adopted a cautious stance, awaiting potential price drops. This cautious market behavior has affected our container buyer’s purchasing decisions. There are several factors at play, with a significant impact on the US market, being the impending election and discussions surrounding potential tariffs on Chinese goods. This has spurred heightened demand for shipping containers, driving prices upwards and creating market uncertainty, which in turn has deterred buyers from making immediate purchases. Additionally, the extended route due to the Red Sea situation has exacerbated supply chain disruptions, further influencing market dynamics.” commented Isabella Zomignani, Associate Account Manager, Americas, Container xChange. 

 Asia continues to grapple with rising container prices and leasing rates in July

Average prices for 40 ft high cube containers (cargo worthy) in China

global trade logistics

“In June, we’ve observed a continued rise in container prices in China, impacting both trading and leasing activities. The scarcity of available slots for China-Europe and China-USA routes has intensified, prompting offline suppliers to offer competitive prices to attract customers. This temporary price decrease reflects urgent liquidity needs among suppliers. Moving forward, we anticipate prices to rebound next month as slot availability tightens again.” shared Haoze Lou, broker team, Container xChange

Market Outlook: H2 2024

The market outlook for the second half of the year is heavily contingent on a revival in consumer demand. Several factors will influence this period, including ongoing geopolitical disruptions and potential labor unrest.

Firstly, we foresee the Houthi attacks to continue and disrupt supply chains with no foreseeable resolution, exacerbating market uncertainties. Additionally, labor unrest in the US east and gulf ports remains a significant potential disruption, with the possibility of flare-ups impacting supply chains further in the latter half of 2024.

However, if the current market conditions persist without major changes, we expect container rates to ease. This reduction in rates could trigger an uptick in container buyer activity, as the buyer side is currently waiting for prices to decline before resuming trading and leasing activities.

Furthermore, according to Alphaliner, the global container fleet grew by 10.6% between June 1, 2023, and June 1, 2024. We anticipate that the introduction of more container fleets into the market will help alleviate some of the price pressures, potentially stabilizing the market and fostering increased trading activity.

Visit Container xChange Market Intelligence Hub for similar analysis and reports.  

 

   

 

global trade ship marine container price market

Rising US Imports Drive Increased Activity in the US Container Trading Market

A recent survey conducted by Container xChange, on its platform, revealed that the container (shipping) traders and leasing companies in the US are witnessing fierce competition and holding up of inventories due to price pressures. However, they do not experience significant hurdles liquidating their inventory. This comes as a positive sign for the container logistics market in the US despite the broader global uncertainties and challenges.

Read also: May 2024 U.S. Containerized Imports Break 2.3M TEUs

The customers also reported increased container movement on the platform in the past six months as compared to last two years. 

“E-Containers has undergone a transformative journey with Container xChange, establishing approximately 50 new partnerships, executing around 90 trading deals, and transacting 25% of its monthly business volume through the platform.” shared Andres Valencia, CEO of E-containers, a Miami-based container trading company. The company attributes this remarkable progress to Container xChange’s liquidity capabilities.

“We went from 50 to over 500 leased containers in just three months,” says Arnaud Maendly, partner and co-founder of MG-Atlantic Sarl, a dynamic player in the container trading market, primarily catering to freight forwarders and traders in Latin America and the Middle East. 

The latest U.S. trade data, published earlier this month, indicated a notable increase in imports in the US, particularly in automotive vehicles, capital goods, and industrial supplies.  According to Descartes, May 2024 U.S. container import volume continued its robust 2024 growth, increasing 6.2% from April and 11.9% when compared to the same month last year. This surge in imports highlights strong demand for container shipping services to handle the increased volume of goods entering the United States. The rise in exports, though more modest, also points to steady demand for outbound shipping services. Despite the overall increase in the trade deficit, the growth in both imports and exports suggests that the container shipping market remains robust, with opportunities for shipping companies to capitalize on the heightened activity in international trade. However, the widening goods deficit and ongoing trade imbalances may signal potential challenges in managing logistics and supply chain efficiency, emphasizing the need for agile and adaptable container shipping solutions.

The majority of respondents described the US container market as ‘fiercely competitive.’ In such a market, having command over data and visibility is crucial for operational sustenance and for business growth. “It’s essential to have a good grip on container prices and leasing rates to know the best times to liquidate inventory or hold off. Understanding the container market in China and Asia is another critical factor for the container traders in the US.,” inferred Christian Roeloffs, co-founder and CEO of Container xChange, the online marketplace for container trading and leasing.

“Our customers in the US benefit from real-time container price data, enabling them to make informed decisions. Many of our customers, especially in Houston, are growing their businesses through deals made on our platform with trusted partners, saving hours of mundane workload. Smart decision-making is key,” added Roeloffs.

Explaining the impact that technology has made to their business, Nicholas Barrera, Inside Sales at E-Containers explains, “Behind the screen are CEOs, founders, top managers, and shareholders, elevating communication and partnership formation to a whole new level. E-Containers values Container xChange for providing unique access to top-tier executives and decision-makers within partner companies”. The marketplace facilitates clear and efficient communication, optimizing business negotiations and collaboration. 

The US container trading market has had to navigate challenges such as trade tensions, particularly between the US and China, leading to shifts in trade routes and adjustments in supply chain strategies. These tensions have impacted container flows, but the market has benefited from well-developed port infrastructure and increasing digital adoption. Platforms like Container xChange facilitate smoother transactions and greater market transparency, helping traders connect with reliable partners and manage their inventory efficiently.

“While the market shows positive signs, operational challenges such as port congestion, labor shortages, and logistical bottlenecks continue to pose risks. These issues can cause delays and increase costs for traders,” cautioned Roeloffs.

 

global trade container

Container Rates Surge Amid The Red Sea Crisis

In response to the escalating Red Sea crisis, leading online container logistics platform Container xChange released a comprehensive report detailing the far-reaching effects on container trading and leasing rates worldwide. The report explores the intricate dynamics of the crisis, shedding light on the unprecedented surge in container prices and leasing rates, as well as the ripple effect on global trade routes.

Read also: Red Sea Global Trade Disruptions: How to Overcome the Chaos

1. IMPACT OF RED SEA ATTACKS ON CONTAINER PRICES

As container vessels take longer routes, capacity constraints contribute to a revival in container rates. The China-to-Europe trade lane has witnessed significant surges, with trading spot rates soaring in key Chinese ports. The disruptions are not confined to China; leasing rates bound for Hamburg, Germany, have doubled since Jan 1.

To provide context on the current state of average container prices in Shanghai, China, in comparison to the peak demand period during the COVID-19 pandemic (2021), we present a chart illustrating the price trends from 2020 to Jan. 29, 2024. The container prices skyrocketed to historic levels in 2021 due to the pent-up demand post COVID, reaching a peak of $6,171 in the last week of September 2021, and falling since then until December 2023 (keeping aside minor seasonal hikes). However, container prices have experienced a significant increase since the beginning of January 2024. 

Weekly China-Europe Trading spot rates continue to shoot up: Trading spot rates for 40-foot-high cube cargo-worthy containers have witnessed a significant surge in key Chinese ports. Noticeable week-on-week increases have been recorded in Xiamen (23%), Shekou (19%), Guangzhou (10%), Huangpu (8%), and Nansha (8%). These disruptions are not confined to China; leasing rates bound for Hamburg have doubled since Jan. 1.

“Since the beginning of the Houthi situation, the trading prices for 40-foot-high cube units in China significantly increased because there is expected tightness around equipment availability in Chinese main ports ahead of Chinese New Year because the loop around Africa soaks up capacity and delays the return of empty equipment to China,” commented Christian Roeloffs, cofounder and CEO of Container xChange.

“At present, there is still surplus in the market. However, the challenge lies in securing space on vessels, and the PUCs (pickup charges) are considerably high. The suppliers are hesitant to reposition their containers to locations with elevated storage fees, and if they do, they often seek to offset these costs by demanding higher PUC.”

A Container xChange customer from India added, “Storage charges in India are inexpensive. Consequently, some NVOCC [non-vessel operating common carriers] opt to utilize containers from other companies rather than moving their own.”

Container xChange’s research indicates a global impact on container trading prices, with the top 10 locations experiencing substantial month-on-month percentage increases. European ports like Le Havre, France, and Duisburg, Germany, witnessed significant decreases, while ports in North America showed mixed results. Meanwhile, Asian ports, including Shanghai, China, and Xiamen, China, saw an increase in average container prices, indicating adaptation to disruptions.

Shown above are the top 10 locations with biggest percentage increase in average monthly container prices across the world.

There are varying degrees of impact on container prices across different regions. Some regions experienced a decrease in prices, while others saw an increase. 

2. CONTAINER LEASING RATES CONTINUE TO RISE

Container leasing spot rates have mirrored the spikes observed in trading prices, especially in the China-to-Europe route. Rates have steadily increased, reaching notable highs. The expected continuation of disruptions indicates a prolonged period of challenges, requiring industries to adapt to structural imbalances in supply and demand.

“We’ve witnessed a continuous surge in leasing rates since around August-September 2023, starting at a low of approximately $200 for a one-way move from Ningbo or Shanghai to Hamburg, often referred to as pickup charges,” says Roeloffs. 

“This escalation is primarily driven by two key factors. Firstly, the widening price gap in trading prices has played a pivotal role, and secondly, there’s a notable equipment scarcity across China. As the price gap widens and equipment availability tightens, the spike has become more evident since the beginning of 2024. It’s clear that the attacks in the Red Sea are not merely a passing phenomenon; they have substantial implications on the routing of container vessels, causing delays in their return trips to China. We have witnessed this surge to top at $800 for a one-way move, marking a fourfold increase.”

The Container xChange co-founder and CEO continues, “We do expect that after Chinese New Year the situation will decelerate and ease up owing to the drop in demand, carriers will be able to reconfigure their network and adjust to the longer transit times around the cape of good hope and are supposed to have a structural supply demand imbalance with a significance supply overhang.” 

He concludes, “The situation is expected to persist for a longer than expected period of time and hence, we will probably have to live with this for a long time.”

Top trade routes with highest month-on-month rate hikes: In the period from Jan. 1-30, 2024, leasing rates for routes bound to Hamburg showed a substantial increase. For example, Qingdao to Hamburg rates surged from $260 on Jan. 1 to $1,060 by Jan. 30. Similarly, Shenzhen to Hamburg rates rose from $500 on Jan. 1 to $750 by Jan. 30. These figures highlight a significant upward trend in leasing rates during the specified timeframe, illustrating the impactful changes in the market.

Below is the list of the highest spikes noticed month on month from December 2023 to January 2024 across trade routes. The prices are the average leasing terms for SOCs (shipper owned containers) as observed on the Insights platform of Container xChange.

 European ports experience substantial increases: Routes connecting Shanghai to European ports, such as Le Havre, Budapest, and Munich, witnessed some of the highest percentage increases. Le Havre recorded an extraordinary surge of 323.08%. This indicates potential challenges in the European supply chain, possibly due to the longer alternative route and increased shipping costs.

Impact on trans-Pacific routes: Routes to the West Coast of the United States, including Oakland, Los Angeles, and Long Beach, all in California, experienced notable increases (ranging from 30.94% to 51.71%). The rise in leasing rates suggests that vessels rerouting around the Cape of Good Hope are facing higher costs, potentially due to increased travel distances and fuel consumption.

Significant impact on transatlantic routes: Routes connecting Shanghai to key North American cities like New York, New York, and Cleveland, Ohio, witnessed considerable percentage increases. This indicates that the disruption is affecting the traditional transatlantic trade routes, with potential repercussions for industries relying on timely deliveries between Asia and North America.

Mixed impact on Asian routes: While routes to Chennai, India, experienced a substantial increase (73.33%), routes to Minsk, Belarus, showed a comparatively lower percentage rise (19.17%). This suggests variations in how disruptions affect different regions, possibly influenced by the nature of trade and supply chain dynamics.

3. INDUSTRIES IMPACTED BY RED SEA TURMOIL

The longer disruptions at the Red Sea trade route pose a significant threat to various industries, including automobiles, electronics, chemicals, consumer goods, machinery, and pharmaceuticals. Delays in the supply chain could lead to production interruptions, impacting global value chains.

“Effectively navigating this critical period requires enhanced predictive analysis, meticulous demand forecasting, and increased collaboration within the industry,” says Roeloffs. “By employing advanced planning techniques and maintaining agility in response to evolving situations, the manufacturing sector can not only overcome immediate challenges but also strategically position itself for long-term success. Adapting to the new normal will involve holding increased inventory, accounting for extended transit times, and acknowledging higher container rates as integral components of the evolving landscape.”

The impact extends beyond individual industries to the broader economy, emphasizing the vulnerability of just-in-time manufacturing processes to disruptions. Businesses across sectors will need to closely monitor and adapt to evolving circumstances to ensure the continued flow of goods through alternative routes if necessary.

A remarkably positive outlook on container price development: In January, the Container Price Sentiment Index (xCPSI), a proprietary container price sentiment tool by Container xChange, consistently maintained historically elevated levels, reflecting a widespread belief that container prices would continue to soar due to the ongoing Red Sea crisis. The industry anticipates sustained high prices, highlighting the profound impact of the crisis on global trade.

The industry’s expectation for container prices to remain exceptionally high in the foreseeable future urges businesses to stay agile and vigilant in their planning amidst evolving global trade dynamics.

The Container Price Sentiment Index (xCPSI) serves as a valuable metric for assessing the prevailing market sentiments among supply chain professionals on the anticipated trajectory of container prices in the upcoming weeks.

Container xChange serves as a global online platform facilitating container leasing and trading, connecting container users with owners. The platform streamlines the process of finding and exchanging containers, optimizing fleet management, and fostering collaboration across the shipping industry. Currently, 1,500+ vetted container logistics companies trust xChange with their business.

 

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Geopolitical Volatility Keeps Year to Date (YTD) Container Leasing Rates Elevated

A YTD analysis of global container leasing transactions by Container xChange shows a notable uptick in average rates since the beginning of 2024, indicating an uptick in demand for container leasing services and increased financial burden on lessors, pointing to a potentially tighter market. The study also highlights persistently strong container trade patters between China and Russia, Taiwan and India, China and India, amongst other hot trade routes so far in this year 2024. 

“China to North America one-way container leasing rates have increased particularly in 2024, with the rise mostly driven by a widening container price delta between China and the US (China becoming “more expensive” up until March vs. US container prices stagnating or decreasing).” commented Christian Roeloffs, cofounder and CEO of Container xChange, an online container trading and leasing platform. 

China to Canada leasing rates rise by 64% in March

There has been a significant spike on the China to Canada ports from February to March. Yantian to Toronto rates surged by 68% from February to March. These were $730 in February which peaked to $1230 in March. The Qingdao to Vancouver leasing rates surged by 64% in one month. Ningbo to Toronto rates surged by 35%, Shenzhen to Toronto rates surged by 26%, Tianjin to Toronto rates surged by 23%. 

China to US rates also surge significantly

The most significant surge was witnessed on the Ningbo to Oakland routes where rates surged by 92% in one month (from February to March 2024), where the leasing rates were $1020 in February and reached to $1963 in March this year. 

Container leasing rates from Shanghai to Los Angeles saw a significant increase in Q1 of 2024 compared to 2023 (see chart below). This uptick can be attributed to significant geopolitical disruptions, primarily the Israel-Hamas war that began in November and continued through the first quarter of 2024, which have kept leasing rates on this route elevated. The average leasing rates from Shanghai to Los Angeles for 40 ft high cube containers increased by 67% from an average of $703 in Q4 2023 (Oct-Dec) to $1173 in Q1 2024 (Jan-Mar). 

Chart 1: Average 40 ft High Cube Container Leasing Rates from Shanghai to Los Angeles

The overall view from key ports in China to key ports in the US also shows the same trend (image below) 

Chart 2: Average 40 ft High Cube Container Leasing Rates from China to US

Fluctuations in both demand and supply lead to significant volatility in container logistics. Currently, we see a widening gap between demand and supply, with demand subdued and supply high due to a whiplash effect from orders during the 2020/2021 period. This leads to (over)supply effectively absorbing disruption shocks and keeping container prices subdued, even as operational costs continue to rise.” shared Roeloffs

“One-way leasing rates, on the other hand, are mainly driven by (a) increasing financing costs and (b) differences in container prices between origin and destination. This leads to e.g., China-US leasing rates to increase on the back of a widening container price delta.” Roeloffs further added. 

China’s container trading prices surge in 2024

Container trading prices in China started to recover as we entered the year 2024.  In April 2024, prices in most regions are higher compared to April 2023, indicating an overall increase in prices over the year. Dalian, Ningbo, Qingdao, Shanghai, and Xiamen particularly increased significantly. (see chart below) 

Row Labels Dalian Ningbo Qingdao Shanghai Shenzhen Tianjin Xiamen
01/12/23 $1704 $1833 $1722 $1746 $1731 $1717 $1662
01/04/24 $2294 $2174 $2090 $2087 $2052 $2278 $2080
% Delta 34.59% 18.63% 21.34% 19.57% 18.50% 32.65% 25.17%

Table 1: YTD Average container prices for 40 ft high cube containers in China (2024)

The rise in prices is due to two foreseeable market forces – cyclical uptake in demand in Q1 and the heightened geopolitical pressures that propel container trading activity in China. 

China to Russia trade stays strong

We continue to see significant container movement Ex China to Russia. Average container prices in Russia remain weak, as low as $811 for a 40 ft cargo worthy container as on 11 April 2024, which was upwards of $4000 during the peak season until Feb’22. This rate is the lowest in 2024 so far that container traders have witnessed in Russia. This is because of added complexities of repatriating boxes out of Russia.

Average container prices continue to decline in North America so far in 2024

Table 2: Average container prices for 40 ft high cube containers in North America (all figures are in US dollars)

An analysis of the average monthly container prices over the past three years reveals a consistent y-o-y downward trend, with 2024 recording the lowest average container prices across the major US ports. This marks the third consecutive year of declining monthly average container prices at these ports.

Market Outlook

We see an improved outlook for leasing on China –US route and a consistently strong trade between China –Russia.

The container logistics market is poised for stabilization, and we do not see market volatility causing the container prices to spike significantly yet. This is also because of the high overcapacity overhang that still exists in the market and acts as a shock absorber for the container market. On the other hand, container leasing market stays strong.

 

baltimore import mach electronic shipping route import 7LFreight Expands Instant Cargo Pricing and Booking for North American Forwarders Across Both Air and Trucking  import container descartes automation baltimore bridge container freight global trade

Baltimore Bridge Collision Sparks Surge in Container Price

Container Traders Anticipate Rise In Disruptions and increase in container prices in the Wake of Baltimore Bridge Collision

  • US ports prepare for rising traffic amid growing freight volumes.
  • xCPSI rises significantly from 26 to 61 points in one week, most supply chain professionals surveyed expect container price hikes in the coming weeks. 
  • Container traders in the US to prepare for potential disruptions, higher container prices and increased demand in the market

In the aftermath of the Baltimore bridge collision, supply chain professionals are anticipating price hikes, as indicated by a significant rise in sentiment for container price increases. A rebound of freight volumes into the US this year, coupled with the bridge incident and the ongoing challenges in the Red Sea as well as the Panama Canal is expected to strain key US ports in the short term. This is expected to lead to increased congestion, additional logistical and operational complexities, and short to midterm price increases.

The Container xChange’s Container Price Sentiment Index (xCPSI) unexpectedly surged from 26 to 61 points between March 18, 2024, and March 29, 2024. This marked increase suggests that the industry is anticipating container prices to increase in the coming weeks—while the suddenness of the index’s move highlights rising uncertainty in the market. 

“The sharp rise in sentiment could be linked to ongoing market volatility, the perceived emergency on the US East Coast due to the Baltimore collision, and the resulting sustained pressure on the market.” commented Christian Roeloffs, cofounder and CEO of Container xChange. 

We have received feedback from industry sources indicating an anticipated increase in container prices in the upcoming days/weeks, with projections ranging from 50-100 USD per TEU. This information suggests that customers looking to order new build units may encounter higher unit prices compared to previous weeks. One manufacturer, whom we used as a source in previous reports, anonymously shared this insight.

Additionally, another customer from Europe, who prefers to remain anonymous, is stocking up on various types of units in anticipation of future price hikes. 

Based on these insights, it appears that the market is poised for price increases in the coming weeks.

Update on the Baltimore Incident

As of 29th March 2024, the Key Bridge Response 2024 Unified Command* reported that 56 total containers loaded on the vessel contained hazardous materials, with 14 impacted. These 14 containers were assessed by an industrial hygienist for potential hazards. The Unified Command and Joint Information Center were established in Baltimore on 26th March 2024 to coordinate the response and disseminate information regarding the Francis Scott Key Bridge collapse.

In the meantime, The Captain of the Port (COTP) Baltimore has established a temporary alternate channel on the northeast side of the main channel in the vicinity of the Francis Scott Key Bridge for commercially essential vessels, according to the official statement by Mayor Brandon M. Scott, on Sunday, 31st March 2024. 

The temporary channel will be marked with government lighted aids to navigation and will have a controlling depth of 11 feet, a 264-foot horizontal clearance, and vertical clearance 96 feet. The Unified Command is working to establish a second, temporary alternate channel on the southwest side of the main channel. This second channel will allow for deeper draft vessels with an anticipated draft restriction of 15 to 16 feet.

Container vessels will need to adjust their routes to utilize this temporary channel, which has specific dimensions and markings to ensure safe passage. This temporary solution will enable commercially essential vessels, including container ships, to continue their operations with minimal disruption despite the bridge collapse.

Shippers to brace for cost escalations and mounting responsibilities

Furthermore, shippers whose routes include Baltimore are expected to face significant challenges in the coming days. One major issue is the increased shipping costs and associated expenses due to rerouting, which are expected to rise. Additionally, the responsibility for picking up cargo at diverted ports has been shifted to the shippers, as MSC and several other ocean carriers have informed their clients. This shift requires shippers to coordinate closely with freight forwarders, trucking companies, and other logistics providers to ensure safe and efficient transportation of the cargo to its final destination.

“In the short term, the bridge collapse will lead to localized disruptions in container availability and transportation. The incident has also led to increased delivery times and fuel costs which could indirectly impact container prices and leasing rates in the coming times.” added Roeloffs. 

US ports under pressure? 

Container xChange’s analysis of loaded imports at the top 10 ports in the US reveals a significant increase in container throughput compared to the previous year. This indicates improved port utilization and suggests a strong start to the year in terms of freight demand and activity.

Ports such as the Port of Long Beach, LA, and Port of Vancouver have shown significant increases in loaded inbound TEUs, indicating strong growth in maritime freight traffic.

Now with these diversions, it remains to be seen how well the ports will handle the rise in traffic. As more cargo gets diverted to these ports, we will see an increased throughput pressure on these ports. This could lead to higher congestion and longer wait times for vessels, trucks, and trains at the port. 

  Given this situation, we would expect container prices at these ports to rise in the month of April and beyond, depending on the intensity of the diversions and its aftermath.  

The aftermaths of the Baltimore collision are being felt nationwide. The New York Gov. Kathy Hochul and New Jersey Gov. Phil Murphy directed their ports Thursday, 28th March 2024, to accept additional cargo to alleviate supply chain pressures from the shutdown in Baltimore. Being the only water route into and out of the port, the shipping channel will be closed for weeks, at a minimum, and possibly for months. 

“By February 2024, most US ports experienced a resurgence in loaded cargo imports compared to the same period last year (Jan-Feb volumes in 2023). While volumes have rebounded and port operations have improved, concerns linger due to the ongoing Red Sea crisis and the recent Baltimore bridge collision, which is expected to cause months-long disruptions. This is likely to increase pressure on nearby ports with similar capabilities and may lead shippers and carriers to consider diverting entirely to the West Coast, potentially resulting in additional challenges or even closures for carriers,” commented Christian Roeloffs, co-founder, and CEO of Container xChange, an online global container logistics platform. 

“As we move forward, we anticipate increased wait times and processing fees at the ports where traffic is diverted in the US. The most striking impact, nonetheless, is on the regional supply chain in Baltimore, where the effects on life, the economy, and businesses are severe,” Roeloffs emphasized.

 

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Baltimore Bridge Collapse: Significant Impact on Local Port and Economy, Limited Effect on US Economy Overall

The recent incident involving the Francis Scott Key Bridge in Baltimore, Maryland, which was struck by a container ship, is expected to have a significant impact on the local port and shipping operations, while its effect on the overall US economy remains relatively limited. The bridge collapse occurred in the early hours of Tuesday, the 26th of March’24, plunging cars into the river below and leading to the suspension of traffic at the port until further notice, according to Maryland transportation authorities.

“Collapse of the Francis Scott Key Bridge in Baltimore is a stark reminder of the fragility of our infrastructure and the critical need for resilience in the face of unexpected events.” said Christian Roeloffs, cofounder and CEO of Container xChange, an online global container logistics platform, based in Hamburg, Germany.

“As we navigate the aftermath, we are reminded that the container logistics industry centers around the critical need for robust risk management and resilience in supply chain operations. It highlights the importance of contingency planning, diversified routing options, and the integration of real-time tracking and analytics to mitigate the impacts of unforeseen events. This incident serves as a reminder that infrastructure vulnerabilities can lead to disruptions, and being prepared with flexible, adaptive strategies is essential for maintaining continuity in the face of challenges.” Roeloffs added.

While the full extent of the impact is yet to be determined, the collision is likely to have far-reaching consequences for the Port of Baltimore and its role in the regional and national economy.

The container vessel “DALI,” was operated by Synergy Group and time-chartered by Maersk. Maersk has confirmed that no crew or personnel were onboard the vessel at the time of the incident.

Areas of Implications to look for in the coming weeks:

  • Supply Chain Disruptions: The collapse of the Francis Scott Key Bridge could significantly disrupt the flow of goods in and out of the Port of Baltimore, particularly automobiles and crude oil. The port is a crucial gateway for specialized cargo and bulk handling, serving as a key link in many supply chains. Delays in cargo movement could lead to inventory shortages, affecting businesses that rely on timely deliveries, like the automotive industry which requires assemblies coming from different parts of the world.
  • Transportation Costs: Companies should prepare to face higher transportation costs as they are forced to seek alternative routes to bypass the affected area. These additional costs could result in increased prices for goods, impacting both businesses and consumers.
  • Regional Impact: The Port of Baltimore is a vital economic hub for the region, supporting thousands of jobs and businesses. The disruption caused by the bridge collapse could have a ripple effect on the local economy, leading to job losses, reduced business activity, and potentially lower consumer spending.
  • Consumer Impact: End consumers could potentially experience delays and price increases for certain products as a result of the bridge collapse, as it could take weeks, if not months, to resume operations at the port. Products that rely on timely delivery, such as perishable goods or time-sensitive materials, could be particularly affected.

 Impact on Container Movement

The collapse of the Francis Scott Key Bridge has led to the suspension of traffic at the Port of Baltimore, a key gateway for container shipping. With more than 40 ships remaining inside the port and at least 30 others signalling their destination as Baltimore, the incident has disrupted the movement of containers. As Baltimore is one of the smallest container ports on the Northeastern seaboard, handling 265,000 containers in the fourth quarter of last year, the flow of containers may be redirected to larger ports such as the Port of New York and New Jersey. This redirection could result in increased congestion and delays at these ports, affecting the timely delivery of goods and potentially leading to inventory shortages.

Impact on Port Operations

The harbor is one of the busiest in the country and an important hub for shipping on the US east coast, especially in transporting road vehicles. It also handles farming, construction machinery, and coal, according to a Maryland government website. Port traffic was suspended until further notice following the bridge collapse.

The Port of Baltimore serves as a vital link for raw materials and manufactured goods, facilitating trade into and out of Maryland, the mid-Atlantic region, and the Midwest United States. It ranks at or near the top of all U.S. ports in handling farm and construction machinery, automobiles, imported forest products, imported sugar, imported gypsum, and exported coal. The port’s infrastructure, including a 50-foot-deep channel and large cranes, allows it to accommodate massive containerships, such as the Evergreen Ever Max, which arrived at Seagirt Marine Terminal in mid-August 2023.

While the magnitude of the impact is yet to be determined, the disruption in traffic and operations at the port could lead to significant economic losses. The port generates nearly $3.3 billion in total personal income and supports over 15,000 direct jobs, with an additional 139,000 jobs connected to port work. The suspension of port activities could result in financial hardships for businesses and individuals dependent on port-related activities.

container spending global trade

China’s Container Trade Faces Hold-Offs Due to Supply-Demand Imbalance

Container xChange has released its latest China market update, shedding light on the current container price trends in China. Despite expectations of price drops post-Chinese New Year, the market is witnessing a significant mismatch between buyer and seller price expectations, in a demand deficit environment.

According to Christian Roeloffs, cofounder and CEO of Container xChange, “There is significant imbalance between supply and demand price expectations for containers. Buyers are expecting price reductions in weeks to come, while sellers are holding off the inventory as they expect prices to remain stable due to tight capacity, especially after the diversions due to the red sea and highly imbalanced trade, particularly, for example from China into Russia.”

China’s exports to Russia grew by 12.5 per cent year on year in the first two months of 2024, while imports rose by 6.7 per cent.

Data from Container xChange’s market intelligence team reveals that while there is a surplus of units held up in Russia, capacity in that region remains saturated. This situation has not created enough confidence for significant price drops and has resulted in a cautious approach from both buyers and sellers, leading to a gradual filling up of depots. However, the current depot pressure is not yet strong enough to prompt traders and sellers to lower their price expectations, nor is there significant pressure from buyers to increase their price expectations.

“Looking ahead,” Christian Reoloffs continued, “while mid to long-term forecasts suggest a necessary adjustment in prices to restore liquidity, the present market sentiment indicates a reluctance to anticipate significant price drops.”

The buyer sentiment of further price declines is also echoed by the Container price sentiment index (xCPSI), a proprietary market sentiment tool for container prices by Container xChange, where the index value fell from an all-time high of 83 points in the last week of January’24 to 22 points as on 14th March 2024.

Chart 1: Container Price Sentiment Index, xCPSI, by Container xChange, as on 15 March 2024

The holding off of the capacity is also due to a demand lull, if we look at the situation from a pure economics basis. The market is currently not being driven by demand.

The recent decrease in freight rates, from $3351 on 23 February 2024 to $3069 on 8 March 2024, represents an approximate 8.41% decline. This trend indicates a more balanced market and aligns with our observation that container prices are not showing significant increases in March.

“The decline in freight rates and the steady container prices suggest that demand is under pressure. Additionally, the management of the Red Sea crisis has alleviated concerns of sudden container price rises, providing a more predictable environment for freight forwarders and stakeholders.”

Deep Dive into China Container Rates:

The analysis of container trading price data from November 2023 to March 2024 reveals a cyclical upsurge in prices leading up to the Lunar New Year, followed by a stabilization in prices post the holiday period. Cities such as Dalian, Fuzhou, Guangzhou, Shanghai, and Qingdao have shown significant percentage increases in prices, aligning with the cyclical trend.

Table 1: Container Trading Price development in China (November 2023 – 15 March 2024, US dollars for 40 ft high cube cargo worthy containers)

The average prices for 40 ft cargo-worthy containers in China was around $1700 in November 2023, while this has stayed at elevated levels since the Houthi attacks at $2100 so far in March 2024.

In 2024, China’s economic outlook is characterized by a blend of opportunities and challenges. It is expected that the country’s leadership will target a growth rate of approximately 5%, supported by robust government spending to stimulate economic growth and bolster public confidence. Fiscal expansion is anticipated to be a key strategy in driving growth, particularly through increased public investment and fiscal transfers. Geopolitically, China faces complexities in its relationships with Western nations. Relations with emerging economies are also expected to be strained, especially regarding security issues in the South China Sea.

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China Reopens after Chinese New Year, Container Rates Plateau

Geopolitical risks are impacting the supplier strategy of many companies globally. While majority (63%) of the companies surveyed by Container xChange in the month of February’24 are looking to diversify their supplier portfolio, 37% are still going to reduce the number of suppliers they aimed to diversify in the year 2021 in response to the pandemic and its resulting repercussions. 

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Chart 1: Container xChange Supplier Diversification Survey Results, February 2024

Persistent geopolitical tensions in eastern Europe and the Middle East, have led to shifts in trade patterns, requiring industry players to redesign supplier mix for their supply chain. 

“We are uncertain about who to partner with and who to discontinue our associations with. The situation is getting trickier for us as freight forwarders due to the ongoing war in the Middle East, leading to fewer partners in the east. The risks of sanctions and increased uncertainty are significant factors driving our need for trusted partners.” – A freight forwarder from the USA and a Container xChange customer

Container Trading and Leasing rates plateau

The month of February 2024 marked a pivotal moment in the trajectory of container leasing and trading rates, which had been on the rise since past three months (starting November 2023), coinciding with the onset of the Red Sea crisis. This inflection point closely aligned with our forecast from the preceding months, as Container xChange had anticipated a reduction in demand and subsequently a reduction in average container prices and leasing rates post Chinese New Year.

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Chart 2: Average container trading prices for 40 ft High cube containers in China 

As the Chinese New Year holiday period concluded and business activities resumed, the rates failed to sustain their upward momentum. 

Our forecasts predict that the container prices will fall by a measure of 8-16% in the coming two months (March and April 2024) in China going by the cyclic nature of price developments as an impact of the post Chinese New Year demand reduction.  We also foresee potential decline in container prices across the United States, ports of Vancouver and Toronto, and in Europe in the coming two months. * 

(*It’s important to note that these forecasts assume that other macro and micro factors remain constant. Any significant changes in these factors could impact the accuracy of these forecasts.)

Table 1: Year-on-year comparison of average container prices** for 40 ft cargo-worthy containers in China. 

**All average prices are rounded off in the nearest dollar. 

Red Sea Update

On November 19, Iran-backed Houthi forces began attacking shipping vessels affiliated with Israel passing through the Red Sea. 102 days later, the shipping industry has emerged from this crisis better prepared than many had predicted.

As the industry typically responds to such crises, the initial impact was felt on rates. Freight rates immediately and persistently jumped as the world entered the last month of 2023. This timing also coincided with the pre-Lunar New Year rush, which builds up in January and culminates in February. Consequently, the freight rate boom continued well into 2024 as shippers aimed to deliver cargo for the cyclical demand, known as the pre-Chinese New Year rush.

Following the conclusion of the Chinese New Year on February 24, 2024, signs of fading demand and falling freight and container rates began to appear.

What Lies Ahead?

A continued decline in rates is expected, although not crashing. Freight rates typically fall by 30% every year from February to March and into April. Similarly, container rates are expected to fall by a measure of 18-6% depending on locations, with a higher percentage of decline expected in Asia.

Over the last 30 days (February 2024), container prices rose by 10% in Northeast Asia, 7% in Oceania, and 2.5% in Southeast Asia, remaining stable in North America. However, prices declined in Europe (5-7%), Japan and Korea (5%), and the Middle East and ISC region (2.4%).

Chart 3: Region-wise change in container prices in February 2024

 

Container Market Price Trends

Despite the demand lull post-Chinese New Year, there have been significant week-on-week changes in market prices for containers:

Locations with biggest week on week growth (as on 1 March, 2024) 

Table 2: Locations with biggest week on week growth in container prices 

Locations with biggest week on week declines (as on 1 March, 2024) 

Table 3: Locations with biggest week on week decline in container prices 

 

A significant development is that the rates did not decline drastically in the last week of February (as seen in the table) compared to previous years. This can be attributed to the volatility caused by the Red Sea diversions and capacity being tied up in the market.

Supply Chain professionals hopeful of higher container prices in the coming weeks

While the cyclical forecasts indicate otherwise, Container xChange’s price sentiment index (xCPSI) indicates that the supply chain professionals remain positive about the container price hikes further into the month of March owing to the persistent red sea situation and its implications on supply chains. 

While the xCPSI was in the negative territory throughout Q1’23, indicating a market sentiment where majority expected prices to continue slashing off the floor, the sentiment index reached an all-time high this February’24 owing to the Red Sea crisis and its perceived impact on container prices globally. 

Chart 4: Container Price Sentiment Index (xCPSI) by Container xChange as on 29 February, 2024, source: https://www.container-xchange.com/market-intelligence-hub/ 

“In the shipping industry, March is a transitional period following the Chinese New Year (CNY). Historically, CNY has led to a slowdown in manufacturing and shipping activity in China, which can cause a temporary decrease in demand for shipping services. However, as businesses resume operations after the holiday, there can be a surge in demand for shipping, particularly for goods that need to be restocked after the holiday period.” explained Christian Roeloffs, cofounder and CEO of Container xChange, an online container trading and leasing platform. 

“Additionally, March is often considered the beginning of the contract season for many shipping companies. This is when annual shipping contracts are negotiated and finalized for the upcoming year, which can influence shipping rates and capacity utilization in the industry. While March can be a period of increased demand compared to the immediate post-CNY period, it is not considered as robust as other peak seasons like the pre-holiday period leading up to Christmas.” Shared Roeloffs. 

Further into the year, rising inflation rates globally could potentially lead to higher production costs and increased consumer prices, thereby affecting trade volumes and container demand. As businesses grapple with inflationary pressures, they may need to reassess pricing strategies.” Added Roeloffs. 

“Consumer concerns regarding prices remain a key factor influencing purchasing decisions, with many consumers waiting for items to go on sale and stocking up on goods less frequently, impacting various product categories. The impact of above-average inflation, geopolitical risks, and uncertainty regarding interest rates is expected to continue influencing consumer goods markets in the near term.” Commented Reoloffs. 

“Additionally, monitoring global supply chain dynamics, including disruptions and changes in trade patterns, is crucial. These factors can significantly affect container trading and leasing rates on trade lanes, highlighting the importance of staying informed and agile in response to evolving market conditions.”

India struggles with container rates volatility 

The average prices for 40 ft cargo-worthy containers remained robust in Nhava Sheva and Chennai, where customers are facing container scarcity and tightening capacity due to the impact of the Red Sea crisis. However, we anticipate a 5% reduction in these prices in the coming two months (March and April 2024).

Although the rates are currently lower than those in 2022 and even lower than 2023, there has been a slight month-on-month improvement. However, there has been a consistent year-over-year reduction in container prices during the subsequent months of March and April, both globally and in India.

The Struggle for SOCs (Shipper-owned containers) in China 

There is a significant disparity between Carrier Owned Container (COC) prices and Shipper Owned Container (SOC) leasing prices. Despite a drop in COC prices, leasing prices for units remain high, leading SOC users to switch back to COC. However, this transition is slow, and market prices are taking time to stabilize. Customers anticipate that SOC leasing prices will eventually balance out, but this process is expected to be gradual.

Moreover, there seems to be a discrepancy between the price expectations of SOC users and the offers from suppliers. SOC users expect lower prices, while suppliers are offering higher prices. This mismatch is prolonging the adjustment process, as either suppliers need to lower their prices or users need to increase their target prices for the market to reach equilibrium. This feedback suggests a complex pricing dynamic in the container market in China, with multiple factors influencing price movements and adjustments.

For similar analysis and for xCPSI, please visit Container xChange Market Intelligence Hub here

About Container xChange 

 

Container xChange serves as a global online platform facilitating container leasing and trading, connecting container users with owners. The platform streamlines the process of finding and exchanging containers, optimizing fleet management, and fostering collaboration across the shipping industry.  

The neutral online platform…     

  1. connects supply and demand of shipping containers and transportation services with full transparency on availability, pricing, and reputation,     
  1. simplifies operations from pickup to drop-off of containers,    
  1. and auto-settles payments in real-time for all your transactions to reduce invoice reconciliation efforts and payment costs.    

  

Currently, more than 1500+ vetted container logistics companies trust xChange with their business—and enjoy transparency through performance ratings and partner reviews. Unlike limited personal networks, excel sheets and emails that the industry generally relies upon, Container xChange gives its users countless options to book and manage containers, move faster with confidence, and increase profit margins. 

 

Connect with us on LinkedIn  

 

For media inquiries, please contact, Ritika Kapoor, Market Intelligence & Brand Lead, Rka@container-xchange.com 

container chain market

Red Sea Attacks Impact Market Sentiment of Shippers and Exporters in Asia

Against the backdrop of escalating tensions in Yemen, the Red Sea has become a focal point of concern for international trade. 

The Houthi attacks continue unabated. In the past week, we witnessed the most intricate series of attacks to date. Fortunately, the military presence in the region, led by the Americans and the United Kingdom, has proven effective in preventing the missiles and drones from reaching their intended targets. Noted Christian Roeloffs, CEO of Container xChange. 

“This is a nightmare situation for shippers and exporters as freight rates, container prices and insurance costs have escalated. The impact has been significantly deterrent for container vessels since last month, 70-80% of container traffic has been rerouted, especially the larger carriers.” Roeloffs added.

Pre and Post-Chinese New Year Implications

“As Chinese New Year approaches amid ongoing disruptions in the Red Sea, we anticipate a tightening of container availability and vessel space in the pre-Chinese New Year phase. The rerouting via the Cape of Good Hope adds complexity to the situation. We expect freight rates to remain elevated, and supply chain managers will need to navigate ongoing schedule disruptions.

Looking beyond Chinese New Year, we project blank sailings and capacity reduction by carriers. The industry is witnessing a focused effort on resetting networks, leading to tightening of container availability and vessel space. While high freight rates and increased costs pose midterm challenges, our analysis indicates that these disruptions are not likely to be long-term. Rate reductions are anticipated on the horizon due to the structural overcapacity resulting from a severe market imbalance.” – Christian Roeloffs, CEO of Container xChange

Global Impact: European Delays and Varied Effects Across the East

The Port of Eilat, Israel’s toehold on the Red Sea, has seen an 85% drop in shipping activity, its chief executive told Reuters last month. 

The impact of disruptions in the Red Sea is reverberating in Europe, causing delays in shipments. Nevertheless, the persistent supply-demand imbalance has provided a cushion to the shockwaves so far and the rates have not skyrocketed yet to the post COVID, pent up demand levels. 

Chart 1: Container Leasing Spot Rates Trends, Source: Container xChange

“The impact has been distributed across the Far East. The container prices are escalating at a staggering rate, rising by 750 USD in less than two weeks.” Informed a customer from China. 

The freight rates, for instance, from China to Europe are up by 282% from $1243 as on 1st December 2024 to $4757 in the week of 12 January 2023 (Source: Freightos).  

Regional Insights: India’s Uncertainty and China’s Market Dynamics

“There is a lot of uncertainty and lack of demand ex-India right now. The effect of red sea is still to be determined in more tangible terms in the Indian market.” An exporter of containerised freight from India told Container xChange. 

Another customer of Container xChange, a containerised freight exporter from India said, “Ocean freight costs across the ISC region is increasing drastically. Also, there is enough supply of containers in the region and there is no shortage of SOCs (Shippers owned containers) observed so far due to the Red Sea situation in this region. In the coming days, equipment shortages from main liners will start to reflect in market. All the big liners like the CMA CGM, MSC, Maersk and Hapag Lloyd have suspended operations through the Red Sea and hence, this will impact the SOC market positively. The pickup charges for shipper owned containers will start to increase in the coming weeks.

While the effects in India have not yet prominently surfaced, the impact of the Red Sea situation is rather glaring in China. 

“The current situation in the container industry reflects a highly competitive and rapidly evolving market. Container factories are operating at full capacity until March, with a surge in demand indicating the intensity of the current situation. The preference for brand new units highlights the market’s anticipation of a prolonged scenario. The heightened demand has led to increased costs across leasing and trading, as suppliers seek quick returns by selling out their units. This has a cascading effect, with leasing suppliers adjusting prices due to rising trading costs, resulting in an overall inflation of prices.”

“The scarcity of units, particularly in the China to Russia and Europe routes, has intensified, leading to exorbitant prices. For instance, some suppliers are quoting $1600 USD for Ningbo to Moscow and over $1300 USD for China to Poland. While the US market has felt the impact, it’s not as pronounced.”

“Intriguingly, entities focused on trading and supplying, such as local depots and trading companies, are strategically limiting sales quantities to 10 units per buyer. This approach stems from the belief that there is room for further price increases. Additionally, these depots face challenges in renewing their stock, as they are unable to obtain CW units from shipping lines. Consequently, stock levels are constrained.”

“The current landscape has also given rise to opportunistic sellers aiming to capitalize on the situation. Notably, sellers are prioritizing profits over traditional cost calculations, leading to uniform pricing in different locations. For instance, 40HC cargo-worthy unit prices remain same in Shanghai and Ningbo, deviating from the norm where Ningbo typically commands a higher price due to lower unit releases by shipping lines. Sellers are presently driven more by profit considerations than a comprehensive cost-benefit analysis, to benefit from the disruption.” Added the customer from China. 

Market Sentiment Shift: Container Price Sentiment Index (xCPSI) Analysis 

The Container Price Sentiment Index (xCPSI) serves as a valuable metric for assessing the prevailing market sentiments among supply chain professionals on the anticipated trajectory of container prices in the upcoming weeks. In the first quarter of 2023, the index values were in the range of -6 to -11, indicating a prevailing sentiment that the majority expected a decline in container prices during that period.

However, the landscape has witnessed a remarkable shift if compared on a year on year, month on month basis. As of January, the xCPSI values have surged to historic highs, ranging between 67-71. This substantial increase signifies a complete reversal in sentiment, with the majority of supply chain professionals now anticipating a notable upswing in container prices.

The scale values were fluctuating within the moderate range of 25-40 in the month of December, on a 100-point scale. 

Chart 2: Container Price Sentiment Index (xCPSI) by Container xChange

This significant escalation in market expectations regarding an imminent increase in container prices is a clear indicator of the industry’s perception of how the Red Sea crisis is poised to impact container pricing dynamics in the foreseeable future. The heightened values on the xCPSI underscore a shared anticipation among supply chain professionals that the unfolding events in the Red Sea will likely exert upward pressure on container prices in the coming weeks.

 Industry’s Way Forward: Overcapacity, Ever Given Comparison, and Potential Challenges

“The freight rates are tripled since roughly a month ago, and the container prices are also expected to rise further in the short to midterm. The anticipated impact is significant.” Added Roeloffs. 

“However, it’s crucial to remember that our supply chains currently hold a surplus capacity of over 6 million TEUs, accumulated over the last two years due to a demand deficit. This excess capacity acts as a vital cushion to absorb potential shockwaves in the supply chain.”

“The degree of impact hinges on the duration of the Red Sea crisis. Should it persist for an extended period, and the excess capacity continues to be absorbed, we could potentially face serious challenges. Drawing a comparison to the Ever Given situation, where disruption occurred during a period of extreme difficulty in securing capacity and historic peak demand, rates skyrocketed to 10 times pre-pandemic levels. While we aren’t currently at those historic highs, the recent rate surge is noticeable when viewed in the short term.” 

The ongoing attacks by Houthi rebels, utilizing advanced weaponry is disrupting vital shipping routes, compelling shipping companies to reassess their operational strategies. The increased risk of hijackings and attacks not only endangers the safety of vessels and their crews but also triggers a domino effect on trade, leading to rerouting, heightened insurance costs, and delays.

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Rising Spot Rates and Container Demand Surge in the Wake of Red Sea Turmoil, ahead of the Chinese New Year

The Red Sea, a vital conduit for East-West trade, is undergoing unprecedented turmoil due to persistent attacks by Houthi rebels, causing significant uptick in fuel and insurance costs, longer voyages and capacity soak up for the transportation and logistics sector. 

Container xChange, an online container logistics platform for container trading and container leasing, issues a critical advisory as the Red Sea crisis deepens, impacting the landscape of global maritime trade.

Recent attacks by Houthi rebels have persisted on the Red Sea, with the most substantial assault launched on January 9, 2024, indicating a continued threat to maritime traffic in the Red Sea. 

Customers of the Container xChange platform affirm that the shipping lines have raised their slot prices significantly. A Container xChange customer based and operating in Singapore shared on the Red Sea matter that, “Average rate on China-Europe quoted this week is about US$5400/40’HC, up from US$1,500 (3X) just the week before.” 

Container trading spot rates shoot up by 48% in Latin America East in the last 30 days (as on 11 January 2024)

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Chart 1: Region-wise container spot rates 30 days delta as on January 12, 2024

Latin America (East and West), Japan & Korea and Europe Mediterranean witness highest increase in Container trading spot rates over the last 30 days.

“We foresee that the rate hikes will flatten out in the mid to long term. We have enough capacity which can be soaked up in longer transit times and yet not cause permanent capacity crunch.” said Roeloffs. 

Demand for Containers shoot up

There is a growing demand for containers in Asia as shippers and forwarders foresee cargo demand in the coming weeks, to fulfil orders ahead of the Chinese New Year. A container manufacturer from China shared with Container xChange, “Shipping companies are demanding more containers now as they avoid red sea. Therefore, Shipping companies and leasing companies have placed more than 750,000 TEU ISO container orders out of China in the last two months.”

Meanwhile, container trading spot rates are increasing at a staggering rate as observed on the Container xChange platform. Spot rates in Shanghai, Hamburg, Boston, in the illustrations below, indicate examples of the steep demand increase that is currently being witnessed for boxes in these hotspots. 

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Chart 2: Average container market price for trading in Shanghai
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Chart 3: Average container market price for trading in Boston

 

Chart 4: Average container market price for trading in Hamburg

As an immediate reaction to the disruption, these average container spot rates and prices are expected to rise, but then plateau after reaching a high. 

The container price sentiment Index (xCPSI), a sentiment tool by Container xChange to measure market sentiment for container price development, reached an all-time high as container price anticipation peaks. This indicates that the supply chain professionals are expecting these prices to further shoot up in the coming weeks significantly. 

Chart 5: Container Price Sentiment Index xCPSI 2023-24, xCPSI measures container price sentiment index concurrently amongst the supply chain professionals

The index value peaked at 71 in January from an average of 27 in December, mirroring the significant impact Red Sea attacks have had on prices so far. 

The Ultimate Cost Burden 

The two visible and obvious cost components that are leading to higher transport costs resulting from rerouting to Cape of Good hope are – insurance and fuel costs. 

Insurance for cargo transiting Red Sea has become challenging. On top of it, insurance costs have surged in anticipation of the difficulties and challenges that do not seem to taper off.

Another element is the fuel cost which has increased roughly by 20-23% by way of traveling through the Cape of Good Hope, as compared to the traditional Suez Canal route. 

“Ultimately, the final consumer pays the freight cost. In the short term, usually there is some intermediary that pays the bills, because they have promised at some certain price, but ultimately in normal circumstances, the price per unit is adjusted marginally to the end consumer when such a disruption occurs.” added Roeloffs.

Fine-tuning Inventory management strategies 

“There is always safety stock, that retailers keep, so buffer stock is there. Yes, it soaks up some capacity, but this event doesn’t have the capacity to impact inventory to an extent that we do not see products on the shelves. I don’t see that coming.” added Roeloffs. 

 The shipping and the global trade largely have become relatively more resilient to supply chain shocks as these become evidently more frequent and persistent. 

“As we witness continued disruptions disturbing the global supply chains in the mid to long term, we will see enhanced supply chain resilience.” added Roeloffs. 

The bulk, oil and gas sector have no impact so far whatsoever as the vessels carrying these continue to operate on the Red Sea. There has been no attack on these vessel types. High value container vessels are being diverted, impacting the big east-west trade from Europe to Asia and vice versa. 

So far, Out of 700, some 500 vessels have been diverted soaking up significant capacity from the existing overcapacity that the industry was grappling with. 

As businesses face this new challenge, there are three immediate recommendations that can improve the situation handling currently for companies-

  • Hold Adequate Safety Stocks: Maintaining sufficient safety stocks is crucial for absorbing disruptions without significantly impacting inventory levels.
  • Enhance Flexibility: Operating with multiple networks and suppliers adds resilience, reducing dependency on a single source.
  • Leverage Technology: Embracing technology is paramount for identifying problems in (or almost) real-time and making informed decisions, ensuring a proactive response to disruptions.

 Note of context:

In a troubling turn of events, the Red Sea, a vital artery for global maritime trade, is facing unprecedented disruptions, primarily due to recent attacks by Houthi rebels on ships passing through the region. The Red Sea, with its strategic importance accentuated by the Suez Canal, serves as a crucial superhighway connecting Europe, Asia, and Africa. Recent attacks have escalated operational costs, creating significant challenges for shipping industries and placing downward pressure on profits. The Bab el Mandeb strait, also known as the Gate of Grief, has become a focal point, and its geographical challenges make it a critical chokepoint for maritime traffic. The disruption is not only impacting the flow of goods but also leading to a substantial re-routing of vessels, resulting in increased shipping costs, longer voyages, and environmental concerns.

Impact Highlights:

  • Rerouting Challenges: Vessels are diverting around the Cape of Good Hope, leading to increased fuel costs, environmental concerns, and impacts on shipping efficiency.
  • Shipping Industry Strain: Shipping costs have surged, with a 60 percent drop in vessels passing through the Suez Canal.
  • Oil Tanker Stability: Despite disruptions, oil and fuel tanker traffic in the Red Sea remained stable in December, providing a glimmer of hope for stable energy supply chains.
  • Rising Shipping Costs: The Red Sea crisis is projected to push shipping costs up to 60 percent, coupled with a 20 percent increase in insurance premiums, affecting overall operating costs. 
  • Insurance Challenges: War risk premiums for shipping have surged, impacting transportation costs and potentially leading vessels to seek alternative routes.
  • Re-routing Impact: Re-routing through the Cape of Good Hope results in 10-20 days of delays, adding complexity to logistics and affecting delivery timelines.
  • Supply Chain Disruptions: The Red Sea crisis spotlights broader issues of supply chain disruptions, requiring strategic planning and forecasting by companies to navigate challenges.

As the Red Sea crisis unfolds, the global shipping industry faces unprecedented challenges, necessitating collaborative efforts and strategic solutions to ensure the resilience of supply chains and mitigate the far-reaching impacts on international trade.