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

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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.