Container shipping has seen a rapid decline from record freight and charter earnings this year, but that still does not make the sector “cheap”, according to Clarksons Research.
The Shanghai Containerized Freight Index hit the highest level on record in the first week of January at 5,110, from a 2021 average of 3,792.
It now stands at 1,923 points, down 62% from the start of the year and 53% lower in the past 12 weeks.
The Shanghai to northern Europe spot rate has fallen by 48% from $5,697 per teu in July to $2,950.
“So, container shipping costs look somewhat lower now, but whilst the outlook is for further easing, in a historical context, they’re not quite ‘cheap’ yet,” Clarksons Research analyst Trevor Crowe said.
Because the collapse has come from such extraordinary levels, rates for now remain well above pre-Covid numbers, he explained.
Freight costs are about two times the 2019 average and charter earnings 2.5 times that level.
The rate figure is more than 100% above the 2010 to 2019 average, and the charter rate index is only 20% off the 2005 peak in the previous boom.
“In a base case, rate levels might not fall back as far as previous lows, but watch closely for incoming fleet growth, ongoing trade headwinds and the development of port congestion, which will determine how far and fast the softening goes from now,” Crowe added.
Fleet capacity will rise between 6% and 8% in 2023 and 2024 due to newbuilding deliveries, he said, although slippage may affect this.
“Spot box freight and containership charter rates are now within the range of previous market cycles,” the analyst said.
‘Astonishing swing’
“It’s an astonishing swing, even if contract rates have reportedly seen more limited declines so far and near-term liner revenues should feel some protection from contract volumes, if they feed through, at levels negotiated previously.”
In April, the Clarksons Research time charter rate index stood at an all-time high of 434, against a 2021 average of 250.
It now stands at 137, down 68% from April and 63% over the past six weeks.
The one-year rate for a 4,400-teu panamax has dropped by 70% from $117,500 per day at the end of August to $34,500.
Perfect storm blows itself out
Declines have been less acute in the larger sizes, where, relatively, availability is still lower, for now.
“The perfect storm of positive drivers supporting the container markets has clearly passed through,” Crowe said.
“A softening in market levels was always expected, but the recent swiftness and severity has surprised many.”
Facing macroeconomic headwinds and surging inflation, container trade is faltering, down 1.6% year on year in the first eight months of 2022, he said.
