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The good news for container shipping was that the Shanghai lockdown ended on June 3 after nearly two months of disruption in the world’s largest container port. Data from logistics analysts Project 44 suggest that in-port delays are declining. Import container dwell times at the Port of Shanghai suffered the most peaking at 15.5 days on April 21 before falling to 9.5 days on May 31. Export delays were lower, peaking at around 4.2 days before falling back to three days but volumes were well down, estimated at 3.4m teu in May compared to an average before covid of more like 4.3m teu per month. As of June 6, Shanghai container port average wait times were down to 31 hours from a peak of 69 hours in late April, according to VesselsValue. This was still four hours longer than the higher end of the range for this time of year over the last three years. China’s Purchasing Managers Index improved in May to 49.6 from 47.4 in April, suggesting that manufacturers were gearing up output again. The new order index was 48.6, an increase of 5.6 points over the previous month, suggesting that the decline in market demand from manufacturing had ended. However, the raw material inventory index was 47.9, an increase of 1.4 points over the previous month, indicating that the raw materials were still waiting to be processed. Listed liner companies’ share prices are taking a battering Across the Pacific, there is still a backlog of containers to work through, according to Pacific Maritime Association president James McKenna who told journalists this month: “By no stretch of the imagination do we think (the supply chain crunch) is over. In fact, we’re planning this to go for the entire year. There’s a lot of backlog still waiting to get out of China. The reality of the situation is that we’re just overwhelmed with cargo.” He referred to problems all along the US supply chain including trucking, warehousing, port logjams and labour relations at west coast Ports. There is plenty of demand apparently, but there is now also plenty of supply as independent liners have entered the Pacific market to offer spot shipments, competing with the big three alliances. Perhaps this is why freight rates from China to the US west coast have fallen 35% from a peak of $13,698 on May 20 to $8,934 on June 24, according to Freightos data. The backhaul rate, from USWC to China, has risen 15% from $832 on May 20 to $963 on June 24 following Shanghai’s reopening and also the passing of the US Ocean Shipping Reform Act, which puts US exports into empty containers being repositioned back to China, among other measures. Freight rates from East Asia to Northern Europe have barely moved in the last month, down about $7 to $10,575 according to Freightos, while backhaul rates are down 17% from a recent peak of $793 on May 20 to $663 on June 24. This reflects a slump in Chinese consumer spending during lockdown, which has not yet recovered. The Chinese consumer spending index was 58.4 on May 31, down from 65.2 on April 30; the consensus for the end of June is 50.2 points, perilously close to contraction. In the Atlantic, the headhaul westbound freight rate from North Europe to east coast North America has edged lower in the last month from $8,381 on May 20 to $8,003 on June 24. The backhaul rate flopped from $670 on May 13, a peak for the quarter, to $484 on June 10 before recovering slightly to $527 on June 24, still 22% down over that six-week period. Where does the market go from here? There is an assumption that any increase in container traffic out of Asia, from Shanghai or elsewhere, will drive up freight rates as the market battles peak season. The second half of the year is usually busier and costlier than the first half. Against that, consumer confidence in the US and Europe is looking fragile. OECD consumer confidence has fallen from a peak of 100.4 last September to around 97.3 in May. In the Eurozone it has tumbled from 102 to 96 over the same period. In the UK consumer confidence is at a 40-year low and a recession seems inevitable. The US Conference Board reports consumer confidence fell in May to 106.4 after recording 108.6 in April, driven it says “solely by a perceived softening in labor market conditions.” In fact the Conference Board could speak for most of the large consumer nations when it concludes in its latest report, “Overall, the Present Situation Index remains at strong levels, suggesting growth did not contract further in Q2. That said, with the Expectations Index weakening further, consumers also do not foresee the economy picking up steam in the months ahead.” As an increasing proportion of equity and capital markets analysts predict a recession, listed liner companies’ share prices are taking a battering. The container shipping industry has been warned.

Consumer confidence concerns for containers

Wallets are remaining firmly in consumer pockets as inflation rattles the global economy.

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