Container freight market normalisation is ‘not really normal’
There’s been a lot of talk of normalisation of container shipping markets, but Xeneta analyst Peter Sand doesn’t believe it is normal at all.
“Then again, it’s not really normal,” was the Xeneta Chief Shipping Analyst’s message in a State of the Ocean Freight Rates webinar on 17 May.
Sand had been describing a situation where the spreads between rates from the Far East into the US East Coast were just shy of $1,000 per feu above the comparable rates into the US West Coast. The maths – $2,424 per feu USEC minus $1,459 per feu USWC – bring the result back nearly to the “normal” relationship prior to the pandemic-induced disruptions that rocked the markets starting in mid 2020.
“Then again, it’s not really normal,” was the Xeneta Chief Shipping Analyst’s message in a State of the Ocean Freight Rates webinar on 17 May.
Sand had been describing a situation where the spreads between rates from the Far East into the US East Coast were just shy of $1,000 per feu above the comparable rates into the US West Coast. The maths – $2,424 per feu USEC minus $1,459 per feu USWC – bring the result back nearly to the “normal” relationship prior to the pandemic-induced disruptions that rocked the markets starting in mid 2020.
All of this comes against the backdrop of an overall rate softening from the highs seen throughout 2022 – the spread on Asia to USWC and Asia to USEc, “normally” at a $1,000 per feu level, had ballooned out to $4,000 per feu in late 2022 as USWC rates plummeted while the USEC gained in strength.
“I dare you to believe that we are all in a normal market,” Sand said, citing “still no [US West Coast labour] deal, a lot of re-routing, and perhaps only upside seen from lower demand…we have not really seen any solid clearance of the obstacles that caused the problems during the Covid years.” At present, he cited congestion on the US West Coast coming down from the horrendous situation in late 2021, early 2022, but said that it was still elevated.
Sand, in his presentation, pointed to the shift in cargo moving into the US East Coast as being of a longer-term nature, citing investments in infrastructure – “giants cranes and terminals being set up” – and warehousing, a trend that begin in advance of the widened Panama Canal, which opened in 2016.
Looking at markets and based on Xeneta data and Sand highlighted moves from Asia into Manzanillo, WC Mexico. He said: “Volatility is the name of the game going forward.” Turning to moves from Asia into the USWC, he showed spot rates rising from $2,000 per feu in March, to $3,000 per feu in mid-May the $1,000 spread referred to earlier even through carriers had announced General Rate Increases only $400- $500 per box.
Reliability of carriers at a time, now, with very few “blanked” sailings, and a component of “normality” was also discussed, using data from Sea-Intelligence. On the Asia to USWC runs, reliability was estimated at 42.2% – meaning arrivals within one day of the scheduled arrival time. “Those ships arrive, on average, five days late,” he said.
Commenting on the USEC, Strausböll noted that reliability had deteriorated, as the ports were overwhelmed, but she said that it has now improved, though it’s still under 50%, compared to a global reliability number of 62%, “not where it should be, but getting better now.”
Source: Seatrade Maritime