June has few surprises in store for container shipping, with demand continuing its unstoppable downward trend.
In its latest XSI report, Xeneta’s interest rate index is down 42% year-on-year, marking the ninth straight month of falling interest rates.
And long-term interest rates fell 27.5% in the last month alone — prompting Patrik Berglund, CEO of Xeneta, to say that “collapse” was the only appropriate descriptive word.
“This is the sharpest decline we’ve seen on the XSI, which tracks real-time global interest rates, and it paints a bleak picture of the state of the industry,” he said.
“The main reason for this is the fact that in May in the US 12-month contracts will be signed and new agreements will come into force. These reflect the reality of today’s subdued markets and are therefore much, much more affordable than their predecessors.
“The impact on the entire industry is visible to all.”
First-quarter losses included Zim, which was back in the red this month with a loss of $58 million, while CMA CGM, which this week announced its 64% fall in pretax profit issued the ominous warning that the first quarter could be its best Industry sales “continue to return to normal.”
FourKites reports that congestion in Chinese ports, the main factor behind last year’s skyrocketing charter rates, has fallen by 62% year-on-year as of today.
Glenn Koepke, Network Collaboration GM at FourKites, predicted, “Volumes will increase in Q3 and Q4, but at this rate they will be lower than 2022, which should translate to a reduction in delays and available capacity during the peak trading season. “
FourKites also anticipates increased re-shoring from China, which will bring new momentum to the industry.
“China will always be a dominant player in world trade – however, we have seen many shippers look to Southeast Asia, India and Latin America as alternatives while still retaining Chinese suppliers for the local market,” said Mr. Koepke.
However, the “normalization” of port congestion alone can hardly explain the decline in rates. Eternal President Eric Hsieh appeared to attach far greater importance to the war between Russia and Ukraine.
“When the war ends, we expect that the volume of cargo in the second half of the year will be better than in the first half. “Freight rates depend on supply and demand,” he said yesterday.
And Alphaliner said this week: “On the cargo front, the news remains grim as rates and volumes remain low on many key routes. Airline after airline is reporting sharply deteriorating financial results for the first few months of the year, with at least two of them back in the red.
“The financial outlook for the remainder of the year generally remains extremely uncertain for most airlines.”