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The Freightos Global Average Containerised Freight Assessment stood at $1,406 per feu on April 14, just 13% of its peak value of USD 11,109 in September 2021. $1,400 is a psychological level, being the approximate five-year pre-covid average. US importers are switching more cargo from the west to the east coast, with analytics firm FourKites reporting that only 36% of imported goods arriving via west coast ports in April, the lowest since mid-2021 and down from 42% inH2 2022. Importers are wary of labour relations at west coast ports, where longshoremen have been disrupting operations again. Dwell times on the west coast stand at 4.8 days in April compared to 3.3 days on the east coast. Freight rates from China to the east coast US ports via Panama increased slightly in the first half of April from $2,100 to $2,170, approximately where they stood in mid-March. Rates to the west coast were $1,030 in mid-March and $1,000 in mid-April. Overall containerised imports to the US continue to slide, as do exports from China, from a peak of 2.035m in September 2022 to 418,141 in February 2023. Despite all the talk of increased economic output in China (4.5% GDP growth in Q1) it was not apparent in the first two months of the year and exporters continue to feel anxious about consumer market health in the US and EU, as well as worsening political relations between China and the US and its allies which are leading to tit-for-tat, targeted sanctions especially in the tech sector. On the Asia-Europe voyage, spot rates fell from $1,414 on March 17 to $1,344 at the end of March but improved slightly to $1,429 by April 14, though this probably only reflects higher bunker prices rather than any serious increase in demand. Rates from Asia to the Mediterranean improved by a few dollars through March to end the month at $2,860 or so, but then slid in April to $2,341 as of April 14. On transatlantic routes, westbound exports from Europe to North America were rated at $4,180 on March 17 but slid continuously via USD 3,771 on March 31 to $3,301 on April 14. Rates on the backhaul fell from $436 to $354 over the same period. Braemar, a shipbroking firm, estimates that global teu volumes contracted 5% in the first two months of the year compared to 2022, while Container Trade Statistics, which aggregates data from liners, estimates a 7% fall. The International Monetary Fund (IMF) in its April World Economic Outlook, estimates a 2.4% fall in global trade in 2023 (in dollar terms) compared to 5.1% fall in 2022.Braemar says that “2023 could represent a bottoming out in terms of growth.” The pandemic is now history and the liner industry is gearing up to deal with decarbonisation and deglobalisation. The bottom line is that both processes are considered to be bad news for efficiency in liner operations. Perversely, this may be good news for time charter rates and ship values. The most immediate way to reduce emissions is to slow ships down, which means that liner companies will have to run more ships. For instance, if a 10,000 teu ship sails 400 miles per day at 17 knots, then it covers 4,000,000 teu-miles and a series of 10 ships will cover 40,000,000 teu-miles. But if each ship slows by 10% to 15.3 knots then 10 ships cover 3,672,000 teu-miles per day, meaning one more ship must be added to the schedule to maintain the service. In a deglobalised world, liner companies may have to service multiple supply chains where they used to service one. For instance, direct services from China to the US might be replaced by services calling at several ASEAN nations and even some Latin American countries before arriving in the US. This would result in longer voyages, requiring more ships to maintain the same number of weekly sailings. For such reasons, even though freight rates are back to long-term averages, time charter rates climbed during Q1 this year with broker indices rising by as much as 20% year to date. Liners appear to be taking in ships to position themselves for the CII and EU ETS by lowering the emissions per ship while maintaining service schedules. It’s cheaper at this point to run more older ships slowly than it is to run fewer modern ships at full speed. That may also be the rationale behind purchases such as MSC’s reported April acquisition of a 2003-built, 6,000 teu ship for $22m. The 20-year-old ship can be run until modern dual-fuel replacements come onstream over the coming five years. The logic may be perverse but the economics presumably make sense to the liners.

Liners prepare for deglobalisation

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