Following years of covid-related congestion and shortages, shipping disruptions could be easing as a result of wavering global demand. Earlier this month, USTN described how and why the demand for shipped goods was falling but now the industry is starting to feel these effects.
Since the Russian invasion of Ukraine caused prices to increase dramatically there has been falling demand for goods from predominantly Western economies. This has coincided with general economic uncertainty, causing big buyers and shippers to be more cautious. This has resulted in fewer worldwide exports, which in turn, has caused shipping channels to clear.
CEO of the logistics platform Container xChange Christian Roeloffs stated last week, “The retailers and the bigger buyers or shippers are more cautious about the outlook on demand and are ordering less.”
As a result, he explained, congestion is easing and both waiting and container turnaround times are now falling. This free capacity, combined with the downward shift in demand has led to a plummeting of container prices.
This is clear from the latest Drewry composite World Container Index, which details the benchmarks for container prices. The new figures put container prices at $3,689 per 40-foot container. This is 64% lower than the price last September, with prices consistently falling for 32 weeks in a row. These figures are a world apart from the index taken during the height of the pandemic, when costs were as high as $10,000.
The evidence can be seen in data provided by the U.S based Descartes Datamyne which shows that all product shipments, except rubber, are down year on year. Nomura Bank also stated that the new rates are in line with the “sharp drop” in container shipments.
Nomura Bank explained, “We assume that the sharp drop in container shipments largely reflects US retailers stopping orders and reducing inventories due to the risk of an economic slowdown.”
These trends can also be seen outside of the US, especially in Asia. For example, Drewry reported that Shanghai has recently re-opened after lockdowns only to find that low demand had meant that port traffic wasn’t large enough to counteract the “wider downturn in port handling levels.”
Additionally, Arcon Containers, based in India, stated that Chinese factories had stopped production for potentially up to four months as “container depot space is full” with idle containers, CEO Supal Shah explained.
The same impacts are also being felt in Europe, with trends from the last two years being reversed. Container xChange explained, “The European market is finding itself flooded with 40-foot high-cube containers. As a result, the region is experiencing a fall in the prices of these boxes.”
Further, the logistics company outlined that many containers are being given away as there is little to no use for them because of the limited demand.
At the moment container prices may feel like the only price going down but idle ships and wasted containers may be yet another economic hit for the US and even the global economy. From the covid-highs to the high cost-of-living-lows it’s clear that the shipping industry is experiencing a radical about turn.
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