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Shippers Frustrated as Spot rates Rise With Demand

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Shippers Frustrated as Spot rates Rise With Demand

As demand surges on the Asia-European trades, carriers and forwarders find themselves grappling with escalating spot rates, leading to frustrations among shippers and logistical challenges. The unexpected tightening of space has heightened concerns about shipments under long-term contracts being rolled, adding complexity to an already volatile market.

European forwarders report a surge in inquiries from customers facing allocation issues, attributing the dilemma to the disparity between contract rates and soaring spot rates. With carriers prioritizing higher-paying cargo during peak periods, the situation has raised questions about the origin of this sudden surge in demand.

Maersk CEO Vincent Clerc shed light on the situation during the first-quarter earnings call, suggesting a period of restocking among European importers. With a notable 9% growth in volumes into Europe, the trend reflects a shift from cautiousness to restocking as consumption holds better than anticipated.

Spot rates on key trade routes, such as the Shanghai-Rotterdam and Shanghai-Genoa legs, have seen significant week-on-week growth, further exacerbating concerns among shippers. Many are already paying premiums to avoid rollovers, signaling a market under strain.

The introduction of new Freight All Kinds (FAK) rates and peak season surcharges by major carriers like MSC and Maersk adds to the complexities faced by shippers. With rates set to triple and additional surcharges imposed, concerns arise about the justification and transparency of these fee hikes.

Shippers express frustration over the lack of communication from carriers and the rapid escalation of surcharges, questioning their necessity and impact on the overall supply chain. The tightening space, attributed to schedule slidings rather than blanked sailings, further complicates matters, leading to reduced allocations on long-term contracts.

As the industry braces for continued volatility, forwarders warn of challenges ahead, anticipating elevated rates and capacity constraints well into the peak season. The uncertainty surrounding rate fluctuations and space availability underscores the need for adaptive strategies and effective communication between stakeholders to navigate the evolving landscape of global shipping.

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Container Market Sentiment Signals Rebound: A ‘Shipper’s Market’ this Peak Season

Container xChange, an online container logistics platform, published its August Container Market Forecaster today. Despite the ongoing market fluctuations, the Container Price Sentiment Index (xCPSI) has exhibited resilience and witnessed growth in July as compared to the month of June. The forecaster also noted that container prices have been relatively stable over the past 30 days (July) as compared to the previous 90 days (May-July).

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Container Price Sentiment Index (xCPSI) by Container xChange

 

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xCPSI survey for July 2023

The Container Price Sentiment Index (xCPSI) conducts market surveys concurrently and distils industry experts’ collective insights about container price trends into a quantitative measure, providing insight into near-future expectations for the container market dynamics. In July, 2,570 supply chain professionals participated in the survey. 

While the opinion is varied, still most respondents (42%) foresee an increase in container prices in the near-term which is indicative of potential market improvement, 28% foresee a further decline in container prices, suggesting a certain degree of pessimism in market conditions. 30% of those surveyed maintained that prices would remain unchanged. 

This growth in sentiment underscores the industry’s anticipation of an imminent turnaround, contributing a sense of positivity to the landscape.

Container Industry Stabilizing Amidst Market Fluctuations

Average container prices have been relatively stable in the last 30 days as compared to the price volatility over the past 90 days (30 days – July, 90 days – May-July). 

Analyzing a 30-day price delta comparison across key regions, the market has witnessed average price fluctuations ranging from -4% to +5.20% in the month of July 2023. However, the container prices have experienced a visible dip over a 90-day period, with Southeast Asia reporting a substantial -15.73% decline from May to July 2023. 

Despite this sustained dip, the sentiment index has stayed strong, even growing in July. The alignment of sentiment and pricing trends suggests an industry outlook that foresees a turning point, shifting away from skepticism towards a shared anticipation of market recovery despite ongoing price adjustments. 

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Region-wise Container price volatility, Source: xChange Insights

Asian ports have been witnessing steady changes in average container prices for 40 HC cargo-worthy containers. For shippers, engaging in container trading or leasing within Southeast Asia at present, compared to three months prior or even just one month ago, presents a viable business prospect.

These average prices for 20 ft cargo worthy containers (region-wise) as of 9th August 2023 is illustrated in the graph below. 

Region-wise average prices for 20 ft cargo worthy containers

Carrier Capacity Management Spur Intra-Asia Trade Surge

According to Fitch Ratings, in the second quarter of 2023, China witnessed a 6% year on year increase in total container throughput, a significant improvement compared to 3% growth in first quarter of 2023. This expansion was primarily propelled by intensification of trade under the Regional Comprehensive Economic Partnership (RCEP), introduction of new foreign trade routes at the Dalian port, and upward trajectory of trade with nations participating in the Belt and Road Initiative.

A surge in demand for containers on Intra Asia trade lanes was observed on the platform, for example, the China to India stretch was popular in the month of July on Container xChange. 

Here are the top five stretches for both the 40 HC and 20 DC containers Ex China on xChange Insights as on 10th August 2023 – 

40 ft HC 20 ft DC
China to India China to United States
China to Russian Federation China to India
China to China China to Russian Federation
China to United Arab Emirates China to Canada
China to Belarus China to United Arab Emirates

Leasing charges for 40 ft HC containers on stretches Ex-China are amongst the top 10 stretches on xChange Insights indicating a bounce back from low leasing pick up charges over the last months.

Leasing charges for 40 HC containers on prominent trade stretches

Indications from Drewry point towards Asia’s entry into a peak season, resulting in a notable 42% surge in the Shanghai-Los Angeles spot rate over a four-week period concluding on August 3rd. Simultaneously, the Drewry Shanghai-Rotterdam index also saw a 20% upswing within the same duration.

Due to increased trade between India and the wider Asian region, ocean carriers are adding more capacity on the Intra-Asia trade route. This is also propelled by the sourcing diversification strategy in South Asia, particularly in countries like Vietnam and India. The aim is to increase shipment volumes and improve market presence. These changes in strategy allow these companies to optimise their operations and potentially strengthen their market position. This is important in a dynamic and competitive shipping industry.

United States: A potential Industry Rebound

The Global Ports Tracker forecasts, provided by NRF (National Retail Federation), indicate that import cargo volumes are poised to reach their peak in August 2023. This surge aligns with retailers’ preparations for the winter holiday season stocking. 

Real GDP increased at an annual rate of 2.4% for the April-through-June period, after rising 2% in the first quarter this year, surpassing expectations and delaying concerns of a recession. 

The S&P Global Flash US Manufacturing PMI posted 49.0 in July, up from 46.3 in June indicates market improvement. A decrease of 0.5% in wholesale inventories also indicates that the inventories are becoming leaner in the US. 

“As economists shift from predicting recession to a ‘soft landing’, the industry holds its momentum. While some experts remain cautious, the foundation of a resilient economy, sustained consumer activity, and strategic federal investments improves the outlook of the upcoming holiday season.” shared Christian Roeloffs, cofounder and CEO, Container xChange

“It’s a shipper’s market this peak season as rates stabilize at below pre-COVID levels and capacity is abundant. Prices are low and this offers a great opportunity for exporters this peak season.” Roeloffs added. 

Eurozone Emerges from Technical Recession: A Turning Tide

In the second quarter of 2023, seasonally adjusted GDP increased by 0.3% in the euro area and was stable in the EU, compared with the previous quarter, according to a preliminary flash estimate published by Eurostat, the statistical office of the European Union. In the first quarter of 2023, GDP had remained stable in the euro area and had increased by 0.2% in the EU. Therefore, avoiding a technical recession in Eurozone. 

“Although we did avoid a technical recession in the Eurozone, retail trade is down by 0.3%, along with high inflation rate. These high prices will continue to exert pressure on operating costs for shipping companies. Carriers and freight forwarders should anticipate rising expenses related to provisioning ships and providing for crew members. Shippers might also experience increased costs for transporting goods, affecting overall supply chain costs.” Commented Roeloffs. 

“Short-term shipping demand may experience a boost, especially for routes connected to countries with stronger growth rates like Ireland and Spain. However, the potential for growth to be less robust than expected warrants cautious optimism. Prepare for potential shifts in shipping demand as companies explore more cost-efficient transport options during uncertain economic periods.” Added Roeloffs. 

The shipping industry’s course for the next few months is intricately woven with economic shifts, trade dynamics, and supply chain adaptations. As we approach the holiday season, the industry’s resilience and adaptability will be put to the test. 

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Average Demurrage and Detention Charges Witness a 25% Dip Globally in 2023; 7 U.S. Ports Rank Highest

Average Demurrage and Detention charges experience a year-on-year decline of 25% in 2023, with a significant 14% decrease compared to the rates in 2020, as found by Container xChange’s annual Demurrage and Detention Charges benchmark report 2023.

However, there are still 11 ports where Demurrage and Detention fees remain higher as compared to 2020. These ports include Antwerp, Jebel Ali, Ningbo, Port Kelang, Rotterdam, Shenzen, Singapore, Tianjin, Xiamen, Hong Kong, and Guangzhou.

Fig 1: D&D fees over the last 4 years across shipping lines for key ports

In an exclusive webinar held in July’23, a powerful panel of speakers from Drewry, S&P Global, and Container xChange discussed the impact of these charges on shippers worldwide amidst the changing dynamics of demand and supply for containers on a global scale.

“There are multiple factors contributing to the inability of these ports to return to normalcy. The significant increase in energy prices, coupled with higher labour costs, and escalating land expenses and port fees, have all played a part,” stated Chantal McRoberts, Director, DSCA Advisory, Drewry

“Furthermore, the implementation of new regulations, particularly those focused on green energy in EU ports, has added to the financial burden. Additionally, the introduction of rules requiring individualized shipment customs clearance, no longer consolidated under one bill of lading, has proven to be time-consuming, as seen in the case of Rotterdam.”, added McRoberts.

Christian Roeloffs, Co-Founder and CEO added, “Bleak expectations for a significant peak season with a substantial increase in volumes, prices, and the potential for congestion and associated charges are evident in our customers. However, a key factor in determining whether you must pay detention charges is the efficiency of your processes and monitoring. How quickly can you act and notify your agent or trucker if something goes wrong, such as a container being forgotten at the terminal. Timely communication is crucial in avoiding unnecessary charges. This holds true in any market situation.”

“Demurrage and detention should ideally be a free market. The number of free days and the charges should be negotiable between parties and carriers, just like any other free market scenario. However, perhaps what needs regulation is the clarity on when the clock starts. Establishing clear time stamps and determining who bears the burden of proof in cases of congestion, where a container cannot be picked up, would be crucial. Payment should only commence once the terminal is able to release the container. These aspects warrant attention and potential regulation.”, he added.

Shipping Industry Facing New D&D Challenges as U.S Regulators Prepare for Decisions

Demurrage and Detention (D&D) rates in the shipping industry have reached unprecedented levels, especially with the Federal Maritime Commission (FMC) set to make crucial decisions. 

Commenting on the new regulations, Christian said, “The pending U.S foreign trade regulator’s decisions on new shipping line regulations “will significantly impact D&D practices” and could even reshape the landscape, bringing both challenges and opportunities.”

The D&D annual report highlights Drewry’s perspective that the FMC must strike a balance between the conflicting needs of cargo owners and shipping lines. Before the pandemic, shipping lines prioritized revenue generation, considering factors like cargo weight and equipment availability when making occupancy decisions. Regulating these market factors presents challenges for the FMC, especially since a substantial portion of US exports fall into low-income and heavyweight categories.

In April 2023, even before the official FMC decision, major carriers like Maersk, MSC, HMM, and Hapag-Lloyd contemplated waiving D&D surcharges on weekends and holidays when terminals are closed. Additionally, the Port of Houston stopped charging import container storage fees during closed terminal gates but raised daily rates in specific positions by 32% starting May 1.

Operational Challenges Likely to Impact D&D Charges Amid Uncertain Demand Recovery

Commenting on the shipping forecast for the upcoming holiday season, Eric Johnson Senior Editor, Technology JOC, S&P Global Market Intelligence, said, “In a very recent conversation with a Non-Vessel Operating Common Carrier (NVOCC) about their thoughts on a major trans-Pacific shipment, we came to know that they don’t expect the demand to recover until after the Lunar New Year next year. This matches what we’re hearing in general.”

“So, if we assume that’s the case, the focus shifts to operational issues at important ports that we need to consider avoiding delays or additional charges once the container is out of the terminal. It becomes more about specific factors in the field that could cause delays in returning containers on time, rather than relying on a big overall economic improvement to drive demand. With each passing day, it seems less likely that there will be a quick demand recovery.”

U.S. Ports Rank Highest in average Demurrage and Detention (D&D) charges

Out of all the ports worldwide, those in North America stand out as the most expensive when it comes to Demurrage and Detention (D&D) charges. Leading this list of costly ports are New York, Oakland, and Los Angeles, taking the top three spots.

Fig 2: Accumulative D&D fees across shipping lines for North American ports: 2023

Even though these ports take the top 7 spots in our ranking table, the overall average charge has at least decreased by 25% in 2023 and stands at a value of $2008 per container per day (coming down from $2692 in 2022). The late fees at the twin ports of Los Angeles and Long Beach surpassed by another western port, Oakland.

Fig 3: D&D fees over the last 4 years across shipping lines for North American ports

 

 

 

 

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Bearish Container Shipping Demand Hits Container Prices and Leasing Rates across Europe

Excess containers stranded across Europe are causing congestion bottlenecks and space shortages at ports, warehouses, and storage yards, according to the March edition of the Europe Container Market Forecaster, published by Container xChange

The online logistics company estimates that container overcapacity currently amounts to between three and five million TEUs (Twenty-foot Equivalent Unit). As well as causing storage shortages, the excess of containers is now putting substantial downward pressure on box prices and leasing rates across the continent.

“The critical Asia-Europe container shipping lane has seen demand tail off rapidly since the summer of 2022 which has been reflected in sharp falls in container shipping spot freight rates,” said Christian Roeloffs, CEO & Co-Founder, Container xChange.

“This is prompting carriers to cut services or cascade capacity on to regional trades. The problem is that this is leaving empties stranded across Europe instead of being sent back to Asia and other origin markets to be loaded with more exports. 

“When export demand picks up once more, this huge pile-up of boxes will gradually be whittled down with most returning to Asia. But strike action during March at the port of Hamburg in Germany and at various container terminals in France will slow that process. The strikes are generally bad for schedule reliability.”

Ports swamped by empties

Excess containers are evident at key European hub ports monitored by Container xChange’s Container Availability Index (CAx). Readings at the ports of Hamburg, Rotterdam, and Antwerp were all above 0.8 in March. This means that a major excess of containers has built up: an index of 0.5 describes a balanced market, below 0.5 represents a shortage of containers, and above 0.5 represents excess containers.

Container xChange is also seeing a relentless drop in container prices and leasing rates on its European marketplace due to excess supply. For example, average container prices for 40 ft high cube, brand new containers have been consistently falling in recent months across Europe. During week 11 (13-19 March 2023) prices dropped to $2832 per unit in Hamburg, to $3050 in Rotterdam, and to $2739 in Antwerp (see graph A below).

Graph A: Container prices Chart_40 ft HC_Brand New

Average container prices in Europe are now considerably lower than in either China or the US (see graph B Below) 

Graph B: 6 months view of average container prices_40 ft HC_brand new_Europe, China, and the US

Moreover, average leasing rates from Ningbo to Rotterdam for a 40 ft High Cube container have dropped from $528 in week 9 (27 February – 9 March 2023) to $446 in week 11, a drop of 15% in two weeks (see graph C).

Graph C: Average leasing rates from Ningbo to Rotterdam_40 ft High Cube 

 

One of Container xChange’s marketplace customers reported: “Liners are now increasingly selling off second hand units into the market at prices below what the leasing companies are requesting in their resale divisions. Most of the second-hand equipment should now be the liner equipment. This is also a sign that depot congestion is now a real issue and liners are aware of this and have started to sell off inventory.”

Economic headwinds

Global oversupply of boxes and low demand for cargo due to economic headwinds are the main drivers of the current excess of boxes across Europe. According to Eurostat, in seasonally adjusted terms the Eurozone’s trade deficit on goods fell from -€13.4bn for December 2022 to -€11.4 in January 2023. Imports dropped by 1.8% to €252.9bn, a fifth consecutive monthly fall. 

More positively, the February S&P Global Eurozone Composite PMI (Purchasing Managers’ Index) reported that the Eurozone economy expanded at its strongest pace since June 2022. Business confidence also rose to a 12-month high but remained below the level prior to Russia’s invasion of Ukraine. 

The positives were offset by euro area manufacturers again recording a drop in demand for their goods, although production volumes broadly stabilized in February, ending an eight-month sequence of contracting output.

Banking crisis dark clouds

However, European consumer and industry sentiment has been further knocked in March by the banking sector crisis which has resulted in major stock market losses. 

“Despite the banking sector’s troubles most evident in the plights of Silicon Valley Bank, Signature Bank and Credit Suisse, such is the concern of central banks with inflation that we still saw the US Federal Reserve push up interest rates by a quarter-point on 22 March,” said Roeloffs.

“What is clear from that decision is that central banks face tough calls over interest rates in the current economic environment, which creates uncertainty for investors who understandably are taking a ‘wait and see’ approach. Less investment, especially in capital goods, means less demand for transportation and lower GDP growth. 

“If central banks continue to increase rates, this will put further pressure on lower quality borrowers. And we know that there are quite a few such borrowers in the transportation and logistics industry. 

“So, a lot of companies will have trouble financing themselves in an environment where already revenues are under pressure through decreased rates. Their costs are increasing through inflation which means higher OpEx and margins under more pressure. And if they now face financing issues, this could lead to serious issues across global supply chains.”

To get complete visibility into container data and analysis, subscribe to our data tool ‘Insights’ here – http://bit.ly/3TysMrT 

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Depots Overwhelmed; Supply Chain Professionals Optimistic for a Rebound in Container Prices

Container xChange, an online container logistics company, published its March container market forecaster today. While most industry participants foresee container prices reviving in the coming months, we see the Container Price Sentiment Index (xCPSI) recording a positive value by the beginning of March 2023.

Historically, around 2700+ industry professionals have participated in the sentiment analysis surveys since February where Container xChange asked for their expectations on container price development in the coming times.

These repeated surveys form a crucial element of the Container price sentiment index (xCPSI) which indicates how shipping professionals worldwide are viewing container prices to develop in the coming times. The positive trend that we see since the last three recordings indicates that the industry expects container prices to improve soon, thereby reviving confidence.  

Excess containers causing depots to run on 90% utilization 

“We learn from many customers of Container xChange that the demand for containers is still there, just that the supply is overshooting the demand. Due to this, we see ripple impacts like for example, depots working on max capacity (Depots in China for instance working on 90% utilization) and therefore, not being able to accept new clients. This is a global phenomenon now. And that is a struggle for the NVOCCs and shipping lines who want to open new markets.” inferred Christian Roeloffs, cofounder and CEO of Container xChange.  

Container xChange provides a marketplace, an operating infrastructure, and a layer of services like payments to container logistics companies globally.

Oversupply of containers has caused depots to run on almost 90% utilization in countries like China which makes it difficult for depots to move the containers around and eventually makes depots less efficient. To put context, depots earn on handlings (gate movements) and not so much on storage. So, this development is also more painful for them in terms of contribution to operational inefficiencies than a contribution to revenue.

Commenting on the state of depots currently, Agnieszka Polejewska, Container Depot Department Coordinator, Langowski Logistics company based in Poland shares with Container xChange, “For inland containers, we do not see many containers on the yards. The production of new containers and their expanse on the ports in Europe and the USA can be overwhelming, as there are still a lot of old containers.  But the production was, is and will be still working, as old, heavily used containers must be replaced. We must wait it out till the end of the Q1 of 2023 to see how this situation is developing because of so many disruptions in our industry.”

Shipping Lines and Leasing Companies holding inventory 

We have also observed that the leasing companies and shipping lines are holding their containers longer than they would normally. They are deploying a wait-and-watch strategy hoping that prices will stabilize. Sell-offs are also not happening yet because the leasing and shipping companies have a free storage agreement with the depots. So, they don’t feel the storage fee pain and hence, wait and see until the prices stabilize.

We do think that container selloffs will intensify into the Q2 or the second part of this year because depots will run out of space, prices will continue to erode, and shipping lines and leasing companies will need to sell off some of that stock so the volume of second containers and trading will increase in future and will further drive down the cost.

Friendshoring is happening 

As geopolitical risks intensify, global economies are working towards diversifying their production, manufacturing, and container sourcing. The forecaster affirms that according to industry research, friend shoring is happening.

On the topic of diversification of trade lanes, Christian Roeloffs, cofounder and CEO, of Container xChange comments, “The process of diversification has already started. Since this is a long-drawn process, we are yet to see visible signs of this in the trade patterns. But we see an uptick in intra-Asia trade. In the future, the larger trades will suffer a demand decrease so capacity needs to be adjusted towards regions with more sticky demand and more stable rate levels. Supply chains will need to be more resilient in the coming years. These relocation strategies will effectively reduce reliance on one production and supply chain hub to a more diverse, smaller trading pattern.”

“For logistics stakeholders, there are more fragmented value chains to be dealt with, more growth to be discovered worldwide, and ultimately, we expect a broader base for business. This could be unleashed by the right set of data and insights to create a better ecosystem for companies.”

For more on container logistics industry developments, download the full report ‘Where are all the containers’ from here

About Where are all the containers (Container xChange’s monthly container logistics report) 

Container xChange sits on a very large set of data on container trading and leasing. This allows us to have visibility into container movements, container prices, leasing rates, and container availability. The report helps our industry participants to access insights which can help in more informed business decision-making for container logistics companies worldwide.

With this report, we give a monthly glimpse of the data-based trends that impact container logistics companies, shipping, and related industries. We also bring forward valuable insights for users and suppliers of shipping containers as well as update them about the average prices of the 20ft, 40ft and 40 ft HC containers, pick-up charges for one-way moves, and the Container Availability Index (CAx) of key ports. Our analysis is based on global news research, extensive primary and secondary market and industry research. Our proprietary data tool for visibility- ‘Insights’ helps us arrive at faster data discovery and trends arrival. For more on insights, click here

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How Will Rising Freight and Container Prices Impact Shipping Rates?

The headlines are full of news about how freight prices are becoming more difficult for logistics professionals and people in similar positions to manage. In many cases, there are knock-on effects for consumers who realize the things they used to buy regularly without issue are becoming progressively less affordable.

The rising container prices put extra strain on company representatives who notice how the ballooning costs impact shipping rates. Here is a closer look at this complex situation.

The Situation Will Impact Shipping Rates for the Long Term

People anxiously hoping for some relief from the current state of freight prices are probably out of luck. At least, that’s what the executives at numerous shipping companies expect. The specifics vary slightly in how long they think rising container prices will persist. However, the news isn’t good across the board.

One executive said people at his company anticipate this situation continuing until at least the first quarter of 2023. Another leader said people would have to get used to a new normal for the shipping industry, featuring more uncertainty, higher shipping costs and longer timeframes for goods in transit.

Some of the executives recommended charterers sign longer contracts with ship owners so the agreements would last longer. More specifically, they might stay valid for several years instead of remaining in effect for months. Agreeing to those extended contracts tackles the price volatility issue and helps logistics professionals rest assured regarding availability.

Numerous factors impact shipping rates and most are out of the direct control of the people they affect. However, some business leaders have responded to the matter by trying to do more business with local suppliers. When goods don’t have to travel as far and aren’t going across international borders, freight prices should be lower and it’s less likely the shipments will experience significant delays.

Logistics Professionals Will See Increased Freight Prices in Various Forms

Some people may get frustrated and feel there’s no rhyme or reason for the rising container prices. But, shipping companies have always based their rates on various factors. For example, courier rates are covering many of the least expensive parts of the shipping process. However, they can still represent a substantial amount when added together.

Many shipping providers also calculate export surcharges that customers must pay. After citing challenges associated with increasing costs for fuel, logistics and more, some have raised those by several hundred dollars.

People also must account for the overhead expenses that keep shipments moving from one stage to the next. Since multiple parties are often involved, the total costs can go up as executives from each company cope with their own progressively climbing prices.

The specific impact shipping rates have on business customers also depends on which methods those parties use to get the goods to their destination. Sea and air are the two main channels for international shipments. The rates for each option fluctuate frequently based on demand.

For example, when more customers want space on a ship, the rising container prices will mean people have to pay more to secure their spots. Those who can’t afford the growing costs will have no choice but to look for other options.

Some companies also charge lesser-known fees to seal or clean the containers customers use. However, as these rates increase, many providers post associated updates on their websites. Even though the information doesn’t negate the fact that freight prices went up, it gives customers time to adjust their budgets wherever possible, potentially mitigating some of the adverse effects.

Customers and Business Owners Alike Will Experience the Effects of Rising Container Prices

When people read about the current logistics landscape, it’s not always easy for them to grasp how the soaring freight prices will affect individual business owners and consumers. Most who purchase things at their favorite shops never think about rising container prices and may have a passing interest in what’s happening based on glancing at the day’s headlines. However, they’ll almost certainly notice the effects.

One thing to remember is the freight issues have already been disrupting timelines and budgets for months. Consider the experience of one seller of holiday goods. He said he paid as much as $22,000 per container during the 2021 holiday season. However, it was only $3,500 the year before that. When faced with such gigantic increases, many business decision-makers have no choice but to pass the costs onto consumers.

Inflation is a much-discussed topic these days and researchers found a direct link between inflation rates and freight prices. They took data from 143 countries while conducting the study. The results showed that when freight rates double, there is a 0.7 percentage rate increase in inflation.

When the researchers published the outcomes in March 2022, they concluded that the impact shipping rates have on inflation could result in an increase of about 1.5% throughout 2022.

They also noted that their research occurred before the Ukraine invasion but believed the issue would worsen global inflation. Various mainstream news outlets have also analyzed the ongoing supply chain issues. They found containers were often stuck at ports or quickly snatched up by the parties with the most financial resources to devote to the matter.

Some retailers also reprioritized what they sent through certain methods due to the rising container prices. For example, having soft items shipped often meant they could fit more per shipment.

Since some items take longer to arrive, customers also have to deal with the reality that they may not get the products in time for events like kids’ birthdays or religious holidays. The problem also affects manufacturers who need parts to build the most in-demand items.

Be as Transparent as Possible About Rising Freight Costs

It is now easier to see the impact shipping rates have on various parts of the supply chain. People familiar with the issue often warn there’s no end in sight.

If that’s the case, the best thing affected parties can do is try to control as many factors within their sphere of influence. Additionally, constant contact with customers about rate increases or delays will ensure everyone has the most accurate and up-to-date information.

 

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Global Average Monthly Container Prices Increase for the First Time in 2022 

Average container prices and leasing rates continue to decline in China

Decline in consumer demand for goods not expected to impact change in container prices and rates in the coming times

For the first time this year in May, the average container prices globally have soared month on month at an average of 5.4% (from $2207 to $2330) for the 20 ft DC and by 15% (from $3800 to $4410) for 40 ft HC. However, the average container prices and the leasing rates continue to decline in China even as the country reopens after massive two months of lockdowns.

The insights are a part of the monthly container logistics report titled ‘Where are all the containers’ published by Container xChange, a technology infrastructure provider for container logistics players.

“We expect a surge of containers onto the transpacific, leading to higher utilization of vessels on this route. We could see a surge in spot rates especially with the upcoming peak season.” said Christian Roeloffs, cofounder and CEO, Container xChange.

“Not only Shanghai was in lockdown, right now Beijing and its biggest harbor Tianjin is still in lockdown. All cities are so interlinked that it influences the whole of China. For instance, Shanghai is the main hub to produce car parts and Shenzhen is for assembly. Since no parts are dispatched to Shenzhen, nothing can get assembled and thus exports out of Shenzhen also experience slow down.”

“If we look at the west, there is major congestion in Los Angeles and Houston. It has become particularly challenging to find open depots and moving units in Shanghai. Depots in Rotterdam are also quite full, followed by Hamburg (but less flagrant than Rotterdam).”

“We saw a decrease in pick up charges in the past months in China because there was a lack of demand for containers there. In the short term, we expect a spike in container prices because the demand (the pent-up demand) for containers will shoot up especially because we have the peak season coming up.

“However, in the mid to long term, we do expect container prices to go down, containers availability to go up and container turnaround times to normalize because we expect the supply chain disruptions to ease.” said Roeloffs.

Impact of decline in consumer demand for goods on shipping? 

“A metric cited by Goldman Sachs shows goods consumption about 5 percent higher from before the pandemic, down from a peak gap of 15 percent. However, the demand side was never really the massive driver of the price increase on the rates. Owing to the supply chain shocks, the containers just took much longer than before and hence there was just not enough supply of containers which coupled with a little bit of an increase in demand and led to this situation that we faced. So, I don’t think that slight reduction in demand will be a massive driver of market changes but of course, it will contribute.”

“To sum up, I think the consumer demand (and eventually presumable unprecedented container demand) wasn’t the biggest driver of the destabilization of market, but it was rather a sort of supply shock and that there were just not enough boxes to go around and because they took longer to move from A to B.” said Roeloffs

Emergence of new trade routes

We do foresee a gradual increase in demand for smaller vessels meant for smaller trade networks. This is because there will be an uptick in more complex networks with more stops and longer turnaround times. Supply chain routes and transhipment lanes are being reimagined to build resilience and to lower the reliance on bigger trade blocks. So, in a way, diversification of trade blocks to diversify the supply chain risks.

For instance, this could mean more stops in Southeast Asia, then all of this goes into Singapore or Hong Kong in a major hub and then re-export to across, for example, the Pacific. That again, not only increases intraregional traffic, but it also increases the importance of these transit hubs. And then lastly, I think it will increase the importance of smaller players in the market.

For more information on container prices, availabilities and one-way rates, please find the full report here – https://www.container-xchange.com/reports/may-monthly-container-logistics-update/

About Container xChange  

Container xChange is a technology company that offers a container trading and leasing platform, payment infrastructure and efficient operating systems to container logistic companies world-wide. Covering the entire transaction process of shipping containers starting with finding new partners to tracking containers and managing payments, xChange makes using 3rd party equipment as easy as booking a hotel. We are on a mission to simplify the logistics of global trade.

Being one of the top ten logistics tech companies globally, xChange is fundamentally transforming thousands of processes involved in moving containers globally. xChange is trusted by more than 1000 container logistic companies such as Kuehne+Nagel, Seaco or Sarjak that use xChange every day to improve operational effectiveness and improve productivity.

A funded company, Container xChange acquired TankContainerFinder.com in 2021 to further strengthen its product offerings portfolio for tank containers trading and leasing capabilities. http://container-xchange.com/

container prices

CONTAINER PRICES SURGE IN CHINA AND INDIA AS SUPPLY CHAIN BLOCKAGES TIGHTEN SUPPLY

The container shortages that have been adding to logistics logjams in Asia and beyond are showing few signs of being resolved, according to the latest data from Container xChange, the world’s leading online platform for the leasing and trading of shipping containers.

In China, average prices for used twenty-foot containers increased 94% between November 2020 and March 2021. The surge from an average price of $1,299 per box in November last year to $2,521 in March indicates that container scarcity is continuing to worsen.

The latest Container Availability Index (CAx) data also reveals that equipment shortages are also now driving up container prices at major Indian ports. Between June 2020 and March 2021, the average used 20 ft. container prices across the ports of Chennai, Mundra and Nhava Sheva rose from $1,106 to $1,755, an increase of 58%.

Dr. Johannes Schlingmeier, CEO & Founder of the container leasing and trading platform Container xChange, commented: “The relentless pace of container shipping trade since the summer of 2020 is not easing and this is reflected in equipment shortages in Asia, and elsewhere. We expect markets will tighten even further in the coming weeks as the ripple effect of the Suez Canal closure at the end of March further disrupts container shipping services and equipment availability.”

Shanghai prices fall

Across the eight biggest ports in China, average prices for used 20 ft. containers climbed 38% from $1,251 in November 2020 to $1,733 in March 2021.

There are indications that equipment is being funneled to China’s largest container hubs. At the port of Shanghai, the world’s largest box port by volume, the average used container price in January this year was $2,162 marking it as the most expensive port in China to procure a used box. By March, however, the average price of a used 20 ft. container at Shanghai had fallen to $1,686.

The port of Dalian is now the most expensive location in China to purchase a used 20 ft. container with prices in March averaging $2028. Equivalent prices at Qingdao and Tianjin were $1,850 and $1,800, respectively.

In India, Chennai was by far the most expensive port to buy used containers in March 2021 with an average price of $2,220 per 20 ft container. Average prices in March at Nhava Sheva were $1,667 per 20 ft container. Mundra was the cheapest location in India to procure a used box with an average price of $1,455.

New vs. used container prices

Such is the urgent demand for boxes in the current highly stressed ocean container market that the cost of procuring a used container has now increased far beyond what was previously considered a ‘normal’ price for a newbuild container.

“It always depends on the exact equipment type, but before shortages became critical a standard used container which was a few years old would cost around $1,000 in China, while a brand-new container would be about double the price,” said Schlingmeier.

“However, in the current market, used containers are selling at $2,300-$2,600 across China, while prices for brand-new containers at Shanghai, for example, have skyrocketed by 64% in 2021 to an average of $3,390.”

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About the Container Availability Index: 

The Container Availability Index tracks millions of monthly container moves to monitor and forecast the global container equipment supply. An index of 0.5 describes a balanced market, below 0.5 a shortage of containers. For more information and weekly email updates, check out https://container-xchange.com/features/cax/

About Container xChange: 

Container xChange is the world’s leading online platform used by 600+ companies to buy, sell and lease shipping containers. Container users and owners use the platform to find containers, work with vetted partners and automate the operational workload. Started by Dr. Johannes Schlingmeier and Christian Roeloffs in 2017, the company has now more than 100+ employees with headquarters in Hamburg, Germany. http://container-xchange.com/