Little to cheer for liners as Chinese New Year approaches

Container indices are levelling out, but there is scant reason for optimism in the opening fortnight of 2023.

Last week’s Splash annual liner forecast carried headline predictions that liner shipping will make just 5% of 2022’s mega profits, and up to 25% of the massive container orderbook will likely be postponed.

Since then, there’s been plenty more doom and gloom headlines for the sector as well as the health of the global economy.

The Shanghai Containerized Freight Index (SCFI) was down another 30 points today, the key spot indicator now on course to duck below the 1,000 point mark for the first time since the onset of the pandemic in 2020 while the contract-focused China Container Freight Index (CCFI) was down 4.3%.

Drewry’s composite World Container Index, published yesterday, decreased a marginal 0.1%. It is 21% lower than the 10-year average of $2,695, indicating a return to more normal prices, but remains 50% higher than average 2019, pre-pandemic rates of $1,420.

“Unless we get a strike on the US West Coast, we remain on track to revert to full normalisation by the end of 2023-Q1,” analysts at consultancy Sea-Intelligence predicted in their latest weekly report. “This means that we see sharply dropping demand combined with a significant injection of capacity due to reduced bottlenecks.”

Sea-Intelligence expects to see more blank sailings, but for now they are appearing insufficient to stem the decline.

Adding insult to injury for the carriers, 2023 will begin to see deliveries of the sizeable orderbook, based on orders made during 2021.

Data from Alphaliner shows fresh deliveries of containerships for 2023 and 2024 are expected to hit a decade high, more than double that of 2016 to 2022 average levels.

In what freight rate platform Xeneta has described as a “stark” display of the weak demand undermining the containerised ocean freight industry, the latest data from Xeneta reveals carriers blanked more than six times the number of sailings on the main Asia to US West Coast corridor leading up to Chinese New Year as they did in the equivalent period of 2019. And, according to Xeneta, this may be just the tip of the iceberg, as current data only counts blanked sailings announced before January 6, with the New Year arriving on January 22.

“This really does demonstrate the low level of demand gripping the industry at present,” said Peter Sand, Xeneta’s chief analyst. “In a normal year, we tend to see very few blanked sailings in the run-up to this major Chinese holiday as shippers stock up on their inventories. So, this is a worrying development for carriers and, no doubt, a bad omen of what’s to come for the year ahead.”

Despite the subdued outlook, Xeneta’s analysis shows that blanked sailings were actually far greater in number last year. However, this was an exceptional situation.

“The current levels are about half of the blanked capacity seen around New Year 2022. However, that was due to huge strains on global supply chains, with congestion and a lack of equipment derailing schedules,” Sand explained, adding: “This year is very different. It’s a clear issue of depleted demand – as we can see by the falling ocean freight rates as carriers compete for business – rather than either congestion, covid or any other structural challenges.”

“Carriers have essentially given up efforts to raise freight rates and have opted to secure cargo volumes in anticipation of the dip post holidays with Chinese factories shutting down earlier than usual,” analysis carried by consultancy Linerlytica this week suggested.

US ocean imports fell in December with box booking platform Freightos projecting them to be well below 2021-2022 levels into H1.

So far, carriers managed to keep their commercially idle fleet count smaller than expected at only 2.6% of the world cellular fleet, according to data from Alphaliner.

Additional slow steaming, vessel diversions from the Suez Canal to the much longer Cape of Good Hope route, and the deferment of many newbuilding deliveries from late 2022 into early 2023 have keep the idle ship count artificially low.

Alphaliner however believes that the weakening market sentiment, falling freight rates and the expected wave of newbuilding deliveries due in 2023 and beyond, will combine to see the inactive fleet grow.