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Container Prices Are in Freefall

Container demand is sinking as cash-strapped consumers encounter persistent inflation, sending container prices plummeting as a result.

Freight rates on some shipping routes are now back to where they where before the pandemic. Container prices from Asia to the U.S. West Coast in 2023 were 11 percent lower than they were three years ago during January 2020, according to data from container logistics platform provider Container XChange.

In an example of the rapid decline in prices over the past year alone, January’s Asia-to-U.S. East Coast container rates were 84 percent lower than in the same month last year, the firm said.

The rate declines extend to European shipping routes as well. A 40-foot high cube container headed for Northern Europe from Asia was approximately $823 in January, down from an average pickup charge of more than $3,000 in the year prior.

Demand dips are leading to more blank sailings than expected, as Ocean Alliance members CMA CGM, Cosco, OOCL and Evergreen have cancelled 53 Asia-Europe westbound sailings scheduled from Jan. 1-Feb. 17.

If demand falls further in the wake of the Chinese New Year, more such blank sailings can be expected. According to Container XChange, blank sailings in Northern Europe increased 715 percent when compared to the figures from 2019.

China feels brunt of trade speed bumps

The dropping prices and general slowdown in freight processed through global ports have broad implications on China’s overall container trade market, which is expected to struggle in 2023.

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According to the General Administration of Customs (GAC), an administrative government agency within China, December’s exports from the sourcing powerhouse dropped by 9.9 percent from a year prior, the largest year-over-year drop since February 2020. That month, the country’s imports fell 7.5 percent.

In fact, across 2022, China’s shipments to the U.S. fell by 19.5 percent and to the E.U. by 17.5 percent, both as demand falls and as more companies seek alternative sourcing markets.

“Container trends are a crucial barometer of economic progress and global trade, and the current market outlook appears bleak. Container prices and leasing rates are plummeting, with the global shipping industry witnessing a freefall in container rates,” said Christian Roeloffs, CEO and co-founder of Container XChange. “The blank sailings have not been able to control the sliding prices, and the mid-term outlook for the industry indicates a slowdown in container trade on the Asia-to-E.U. and Asia-to-America trade lanes. However, contract rates are closer to spot rates, indicating the lack of demand for long-term commitments, which can be attributed to market uncertainty.”

When assessing the top-three most-trafficked ports of Asia, including Ningbo and Shanghai in China, as well as the Port of Singapore, Container XChange observed similar year-over-year declines in 20-foot container (TEU) rates across all three.

The average price in Ningbo decreased 48 percent from $2,460 to $1,290, while in Shanghai it fell 46 percent from $2,370 to $1,270 per container, and in Singapore it went down 49 percent from $2,410 to $1,240.

Container costs out of Asia have seen noteworthy decreases even in just the past few months, with average market prices of an individual TEU out of Northeast Asia dropping 9 percent from $1,873 in November 2022 to $1,701 in January 2023. Southeast Asian TEUs had a slightly larger 12 percent drop from $1,871 to $1,642 in that time frame.

“Intra-Asia trade is showing some resilience, with comparatively better demand for containers,” Roeloffs said. “Nonetheless, the mid-term outlook does not project demand to rise to the heightened levels witnessed in 2020 and 2021, except for a possible inventory replenishment cycle that may bring about some demand for containers. The falling rates and increased availability of containers in certain regions of the world are indicative of weak demand and slower economic growth.”

Container XChange predicted in its recent report, titled Where Are All the Containers?, that with the easing of port congestion in the U.S. and import volumes stabilizing, container rates should begin to normalize towards the latter part of 2023.

For now, as prices fall, so does the expectation that trade’s trajectory will follow.”The United Nations Conference on Trade and Development (UNCTAD) said that global maritime trade grew just 1.4 percent last year, and is expected to grow by 2.1 percent per year through 2027. This is down from an average of 3.3 percent recorded annual growth in the last 30 years.

Russia-China trade activity escalates

While trade may be slowing down overall, one market may actually be an unlikely beneficiary, particularly as China’s exports to the U.S. and E.U. decline. In 2022, Russia saw imports from China increase by 8.3 percent.

The two markets are further warming up to each other as trade partners. According to GAC, the value of goods traded between China and Russia reached 1.28 trillion yuan ($190 billion) in 2022, a 30 percent jump from 2021, largely due to China’s purchases of oil and coal from Russia.

The Container XChange leasing platform found that as of Jan. 17, the average pickup rate for leasing a container from Shanghai to Moscow was $832, down 66 percent from $2,425 in January 2022. Notably, much of the decline happened last year from January to September 2022, when each individual TEU was $898 on average. Since then, container prices from Shanghai to Moscow fell 7 percent.