Container market to end year on weaker note

The container shipping spot freight rates have collapsed to near pre-Covid levels, reversing the highs reached in the past year.

PHOTO: A CMA CGM container ship. CMA CGM

The weekly Drewry World Container Index (WCI) was assessed at $2,120/40ft container in the week of 22 December. The spot rates have fallen from recent peak levels of $9,698/40ft container in January this year.

Similarly, container spot freight rates have also plunged for major Asia-West Coast trade routes. Drewry accessed Shanghai- Los Angeles container spot rates at $1,992/40ft container, down from about $11,000/40ft container in March this year.  

Global container freight rates have almost reversed all the gains made during the pandemic period, when freight rates surged to multi-year highs on the back of strong demand for shipped goods and supply chain disruptions.

Container shipping demand is likely to remain low next year weaker economic prospects for several major global economies, Maersk stated in a recent market update. It claims container volumes decreased by 4.3% between July and September, compared to the same period last year.

The European and Asian trade routes saw particularly low container volumes, Maersk said.

Weaker demand combined with low spot rates have forced some container shipping companies to re-evaluate routes, which could possibly dent bunker demand in major container ports such as Shanghai, Los Angeles and Singapore.

The Port of Los Angeles saw a container throughput of 639,000 TEUs this November, down from 811,000 TEUs a year earlier, according to Los Angeles port data. The drop of nearly 22% suggests that fewer container ships arrived in Los Angeles, and by extension that it saw lower bunker demand. Container ships are among of the biggest, if not the biggest, bunker fuel consuming vessel types.

On the contrary, Shanghai's throughput was about 4.1 million TEUs in November and similar to a year earlier. And that was sharply up a low of 3.08 million TEU in April this year.

It may be challenging for some shipowners to manage the additional tonnage capacity that has come with new container ships entering the global fleet, data firm Linerlytica says. Around 23 newbuilds with a total 102,000 TEU capacity have been delivered in the past 30 days, according to its numbers.

By Nithin Chandran

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