Freight News, Sea

Have container shipping rates turned the corner?

[ September 15, 2022   //   ]

Global container shipping turned a corner in the second quarter of 2022 with a fall in average earnings per container carried for the first time since 2020, according to the latest quarterly review by MDS Transmodal and Global Shippers Forum (GSF).

Covid lockdowns in China suppressed the supply of manufactured goods and demand for raw materials while sentiment plummeted in consuming countries due to rising interest rates and energy prices, it said.

While total container carryings were up on in the first quarter of 2022, they remained below the same period a year ago. This was despite traffic that had switched to other modes or to bulk shipping earlier in the year returning to containers.

The reliability and consistency of port calls showed a small improvement in the second quarter, but this was seemingly made by intermediate port calls being missed altogether. The capacity lost to ‘skipped’ ports remains high, the report added.

A reshaping of container shipping service patterns seems to be underway, it continues with a further increase in the second quarter of the number of services connecting no more than two regions and a corresponding reduction in those linking more than two regions. Long, multi-port ‘loop’ schedules are being replaced by ‘shuttle’ services with transhipments at hub ports in order for containers to reach their ultimate destinations.

Chairman of MDS Transmodal Mike Garratt, commented, “In the last quarter we have seen global network capacity grow marginally but underlying demand stay flat. Spot freight rates are now falling steadily and it will be interesting to see as a consequence the share of the minor bulks trade that returns to the major lines. The direct connectivity and reliability of making port calls offered to shippers continues to deteriorate.”

GSF director James Hookham, added: “This is the first time the GSF/MDS Transmodal Quarterly Review is showing a significant change in the direction of travel. This is just one set of data points, but shippers are telling us the world economy, international trade and the global shipping market have entered a new phase, with different factors at work compared to the past two years.”

GSF and MDS Transmodal say they will continue monitoring whether the opportunistic gains made by shipping lines since 2020 are consolidated into a strategic shift in rates and service patterns imposed on shippers, or whether carriers will respond to the changing conditions.

James Hookham continued, “This change in market dynamics could provide a context for the use of freedoms granted to shipping lines under anti-trust immunity and Block Exemption legislation to re-engineer an industry-wide shift in capacity deployment, service patterns, port call frequency and market share concentration. Recent experience has shown this is not a market where regulators can ‘legislate and forget’ hoping expected behaviours are observed.”