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2023 will erupt "price war", the market will face further consolidation, freight rates plummeted!
Dec 12,2022
A few days ago, shipping and container cost accounting experts predicted that there will be a bullwhip effect in the industry in 2023, a far cry from the soaring freight rates in 2021 and 2022,Freight rates are expected to plunge, "almost within the range of variable costs".
Christian Roeloffs, co-founder and CEO of Container Xchange, said recently:"It is highly likely that a full-scale price war will break out in 2023.. The capacity shortage seen in the past two years will not be repeated, and there will be sufficient capacity on the ship and container side. Given the competitive landscape in the container shipping and liner industry, I don't think large shipping companies in particular will back down,Container freight rates are expected to fall within the almost variable cost range. We also foresee that the market may face further consolidation.”
It's already been reported,Some logistics giants are on the verge of crisis.A start-up operating trans-Pacific and Asia-to-Europe routes is said to be at risk of default.
As the Dreary World Container Rate Index shows, the capacity crunch in early 2022 and subsequent freight rate hikes have now largely disappeared. The current price is hovering in the $2100 s, compared with nearly $10000 for a 40-foot container in January.
As with products, there is now an oversupply of containers as supply chains grapple with issues that have been delivered but not yet sold through excess inventory.
Shipping lines continue to reduce ship capacity and suspend shipping in large numbers.Maersk said in a recent advisory report that it will continue to adjust its services from Asia to North America, Europe and the Mediterranean to better adapt to demand fluctuations." Container Xchange said the company has observed a similar trend in the industry.
"Entering 2023, freight forwarders will be able to conduct a large number of window shopping, and there will be a lot of room for negotiation, especially at the beginning of the year. As spot freight rates drop significantly, contract freight rates will also drop." Roeloffs added.
In the future, supply chain procurement and manufacturing will be diversified, so it will be the vision and strategy to seek more flexible supply chain companies. In the future, the volume of Asian containers will increase. In such an environment, freight forwarders and traders will tighten their profit margins.Cost will determine everything.In 2023,Strict cost control has become the top priority of freight forwarders;On the one hand, there will be a lot of negotiations with shipping companies, on the other hand, the optimization of operating costs is very important for freight forwarders.
Stop the flight! Continued capacity reduction
According to the latest data from Deluli, of a total of 724 scheduled voyages on major trade routes across the Pacific, Atlantic and Asia to northern Europe and the Mediterranean, between the 50th week (December 12 to December 18) and the 52nd week (January 9 to January 15)100 voyages were canceled, with a cancellation rate of 14%.
During this period,Fifty-five per cent of air traffic takes place on the eastbound trans-Pacific route, 25 per cent on the Asia to Northern Europe and the Mediterranean route and 20 per cent on the westbound trans-Atlantic trade route.Over the next five weeks, THE Alliance has announced the cancellation of up to 47.5 voyages, followed by Ocean Alliance and 2M Alliance with 16.5 voyages and seven voyages respectively. During the same period, the Non-Shipping Union implemented 29 blank voyages.
Deluri said that due to the decline in demand, the shipping market is expected to face excess capacity throughout 2023, coupled with shipping companies ordering new ships in phases during the epidemic, in stock freight rates on major east-west trade routes may reach pre-epidemic levels earlier than expected. With a smooth peak season in 2022, some shipping companies with relatively small vessels will find it harder to maintain normal operations without losing money in highly volatile market conditions. in the east-west main trade routes operated by large ships,As freight rates fall, it is likely that more newcomers will exit the market.
These market conditions pose challenges not only for carriers, but also for shippers and BCOs when conducting contract negotiations, as planning to cope with falling demand for cargo becomes increasingly challenging.
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