In recent times, market analysts have expanded their scope to assess the growth of countries, regions, and global container shipping using various parameters. They now go beyond traditional economic indicators and delve into real-time consumer data, such as credit card payments, train miles traveled, and power consumption.
One often-overlooked indicator that has caught their attention is global freight rates and capacity availability. Given that sea transport accounts for about 90% of global trade and plays a significant role in certain regions, changes in shipping rates can have far-reaching implications.
Recently, headlines like “Shipping Lines Add Nearly 300,000 Tons Equivalent Units (TEUs) in June” on Seatrade Maritime might prompt the immediate assumption that rates will fall and overcapacity will be a concern due to a potential economic downturn. However, the situation may not be that straightforward.
According to Container Trade Statistics, global demand remained relatively flat from March to May. Surprisingly, total imports in Europe, which is often referred to as the “sick man” of the global economy, increased by 4%. Moreover, Asia-Europe trade witnessed an impressive 8% growth.
A closer look reveals a mixed picture. U.S. imports experienced a 15% decline, continuing a prolonged decrease since the fall. This might imply that economic activity in Europe and Asia is faring better than commonly portrayed in the media.
The shipping lines themselves seem confident in the continuation of this trend. They have even announced rate increases for their Asia-Europe services in the latter half of the year and are actively restricting capacity to North America to support rates.
Despite witnessing a nine-month downward trend in shipping rates, the addition of new capacity doesn’t necessarily mean rates will continue to plummet throughout the rest of the year. Shipping lines have learned from the challenges posed by the pandemic and are now more inclined to cooperate and manage capacity strategically to maintain rate stability.
As such, this recent uptick in demand might present an opportunity to reverse the previous price drops and stabilize rates in the second half of the year. While uncertainties remain, it’s essential to recognize that container shipping trends are influenced by a complex interplay of factors, and a broader perspective is needed to make accurate assessments.
The container shipping industry is witnessing shifts in demand and capacity that challenge our assumptions. While there are both positive and negative indicators, the situation is far from predictable. The industry’s ability to adapt and cooperate during challenging times may play a significant role in determining the trajectory of shipping rates in the coming months.
