Global shipping industry faces alarming drop in container prices: Container xChange

As observed by Container xChange, amidst global concerns US EU retailers’ confidence in efficient inventory destocking is not translating into container demand revival in Asia. And, the Container Availability Index (CAx) at the ports of China verify the same.

 A steady influx of inbound containers is witnessed at Chinese ports, meaning that export activity is not getting reflected in container outbounds. According to our CAx, major ports in China are experiencing a higher proportion of incoming containers compared to outgoing ones continually. A higher CAx value signifies a larger number of inbound containers in relation to outbound containers.

The United States faces a series of challenges, including soaring prices, inflation, and wage disputes. The average container prices remain stagnant, indicating a decreased urgency in cargo demand and container return to Asia.

Fig 1: Container Availability Index of 40HC containers at ports of Shanghai and Ningbo

Looking at the efforts to manage inventory, US companies express confidence in reducing excess goods accumulated in 2022. However, a study by Armada Corporate Intelligence highlights that the destocking process is not progressing rapidly. Approximately 61.5% of US businesses still hold excessive stock, while only 23.7% maintain a well-balanced inventory, and 11.3% struggle with understocked situations.

Presently, retailers confront the predicament of fully stocked warehouses, as indicated by the St. Louis Fed’s report on inventory levels, which have surged to over USD 770 billion, a substantial increase compared to previous years. This surplus of inventory poses a unique challenge for businesses as they navigate the complexities of managing and utilizing their stocked goods.

Fig 2: US Shipper Inventory Sentiment Index by BlueGrace Logistics

China, the most important destination for the westbound trade also provides no clear signal of demand revival for containers.

Fig 3: June on June Comparison 2021-23, China ports

Asian ports rank among the five regions with the lowest average container prices in the last seven days for 40 HC Cargo worthy containers.

Fig 4: Container Price Spot Rates in the last seven days for 40 HC Cargo worthy containers

Further, the industry forecasts suggest that the traditional 3rd quarter peak in Asia-US trade might not materialize this year. The reason behind this apprehension lies in two factors: the lingering effects of weak demand and the problem of excess capacity. During the first half of the year, container exports from Asia to the United States witnessed a staggering 21.8% decrease compared to the previous year, amounting to a total of 8,171,160 TEUs.

“This sharp decline casts doubt on the efficacy of any potential container rate reinstation that container liners may have in mind for the upcoming Q3, as it seems that a meaningful rebound is now only expected in Q4. The unexpected twists and turns in the trade dynamics between Asia and the US underscore the intricacies of the global economy. While some nations are grappling with substantial losses in exports, others are cautiously rejoicing at their modest gains. All eyes are now on the rest of the year, hoping for a reversal of fortunes in the wake of these uncertain times.”

Christian Roeloffs, CEO and co-founder of Container xChange.

Alarming Drop in Container Prices Globally

According to a recent survey conducted by Container xChange, freight forwarders are adopting a cautious approach. In June 2023, container prices in major markets such as China, Europe, and the US reached their lowest average compared to the same period in 2022 and 2021. This decline in prices could potentially impact the profits of shipping companies.

An in-depth study of average container prices for standard containers (new and cargo-worthy) during the second quarter of 2023 (April-June) reveals that most regions experienced either continued price declines or minimal price fluctuations. Throughout Q2, there was no significant increase in average container prices, both for new and cargo-worthy containers.

Reviewing the container price development from Q2 2023 (referred to as “delta” in the chart below) on key routes, only the Northern Europe and Middle East and ISC region witnessed a slight increase in these prices, while the remaining regions saw negative trends for standard containers.

Fig 5: 90 days delta of region-wise average container prices for standard containers

The average container prices for 40 HC Cargo worthy containers in Singapore have been sliding gradually from $1913 in January 2023 to $1614 in July 2023 seeing an average dip of 15%.

Fig 6: Average Container Prices in Singapore for 40 HC Cargo worthy containers

The average container prices for 40 HC Cargo worthy containers in Malaysian ports have also declined steadily From January 2023 to July 2023, dropping from $1925 to $1642, representing an average decrease of 14%.

Fig 7: Average Container Prices in Malaysia for 40 HC Cargo worthy containers

Between January 2023 and July 2023, the average prices for 40 HC Cargo worthy containers in Vietnam ports have consistently decreased, falling from $1962 to $1492, marking an average decline of 23%.

Fig 8: Average Container Prices in Vietnam for 40 HC Cargo worthy containers

This indicates a challenging times ahead for the shipping industry, worrying freight forwarders about the declining container prices, which pose complex challenges.

“The year 2023 started with significant oversupply of containers and high uncertainty in the market—which led to substantial rate erosion. The average container prices have been freefalling and there are no signs of revival as we approach the busiest period in the shipping industry. It is quite evident that the peak season is almost invisible.” added Roeloffs.

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