The container shipping industry has been experiencing a series of challenges and uncertainties in recent months. With rates hitting bottom levels and demand continuing to decline, market stability remains a topic of concern. In this blog post, we will delve into the latest developments, including fluctuating rates, regional shifts in trade, and the impact of technology on the forwarding industry.
Rate Fluctuations and Industry Challenges: After reaching the bottom level, market participants are cautiously optimistic about the stability of rates in the upcoming week. The FAK (Freight All Kinds) rate from NEA origins to AUEC is expected to increase to following the footsteps of COSCO and ANL’s finalized FAK rate adjustment. However, the FAK rate from SEA origins faces challenges due to poor liftings, resulting in its extension.
Competitiveness in SEA Origins: Despite the challenges faced by the SEA origins, PIL rates from this region have become increasingly competitive, both in terms of commodity and customer name. This development signifies the efforts made by PIL to stay competitive and maintain a strong market position.
Market Expansion and Carrier Preferences: The market to AUWC and New Zealand has been extended until the end of June, with most core carriers such as ONE, COSCO, Maersk, and ANL opting for this extension. However, these carriers are also favoring 40’HC containers due to a deficit of 20’gp containers and limited capacity.
Container Shipping’s Downward Correction: The month of June brings with it few surprises for the container shipping industry. Demand continues its downward correction trend, making May the ninth consecutive month of dropping rates. This decline, the largest recorded in real-time global rates developments, paints a bleak picture of the industry’s current state.
Regional Shifts and Chinese Port Congestion: FourKites, a logistics tracking platform, reports a 62% year-on-year decrease in congestion at Chinese ports, a significant contributing factor to last year’s high charter rates. Shippers have been exploring alternatives in South-east Asia, India, and Latin America while maintaining Chinese suppliers for local markets. This trend suggests a growing interest in diversifying supply chains to mitigate risks and reduce dependence on a single market.
The Rise and Challenges of Tech-led Forwarding: The recent demise of India’s digital forwarder, Freightwalla, highlights the challenges faced by the technology-driven forwarding industry. Both carriers and traditional forwarders have invested heavily in technology, including quote systems and visibility tools, to enhance their operations. However, staying ahead of the market in terms of technology remains a significant challenge for industry players.
Air Cargo’s Struggles: While the ocean market faces difficulties, the air cargo sector is also encountering severe challenges. Air freight is expected to hit rock bottom in the coming months due to a combination of excess summer capacity and weak cargo demand. This decline may result in air cargo being dismissed from client boardrooms, adding further strain to an already struggling industry.
Conclusion: The container shipping industry is navigating a period of uncertainty and challenges. With fluctuating rates, shifts in trade patterns, and the impact of technology, industry players must remain vigilant and adaptable. While the future may seem uncertain, strategic adjustments and a focus on innovation could pave the way for recovery and renewed growth in the shipping and logistics sector.