We share the interview on the container sector with Maritime Strategies International (MSI) analyst Daniel Richards for the Sea Trade Maritime Podcast. The analyst highlights that three different elements are important for the container shipping industry going into 2023: expected business growth, the pace and size of fleet growth, and issues related to congestion and capacity.
Trade Growth Prospects
On business growth, Richards says there has been excessive inventory buildup, pressure on real estate markets from interest rates, and also pressure on consumers’ disposable income. “So the trade growth outlook, at least for the first half of 2023, will be quite challenging.”
Fleet Growth Forecast
Talking about the growth in tonnage supply, he says: “What is the big immovable object that lies ahead for the balance of the container market is that supply growth will accelerate markedly.” MSI forecast fleet growth of 7% year-on-year in both 2023 and 2024, and above-average growth in 2025. Fleet growth may reach 10% year-on-year without an expected high volume of scrapping.
Congestion and capacity
The pandemic has been characterized by severe supply disruption and container shipping congestion, but this is now changing. “You’ve seen a pretty considerable loss of effective capacity during the period that coincided with the pandemic, and that’s now starting to ease as well,” says Richards.
Container freight rates
The second half of 2022 saw an extremely sharp drop in spot container freight rates, which are now much lower than the contractual rates agreed between shippers and lines at the beginning of the year. Richards noted that the Xeneta data showed clear signs that contract rates were starting to fall.
“A large proportion of the contracts will be renewed in the first half of next year, and it is clear that the lines are entering that renewal season, not on the right foot. Blank navigations are not yet proving as effective as they were in the early stages of the pandemic. So now that spot rates have led, contract rates are likely to follow.”
The level of drop in contract fees will vary depending on the line, business focus, and the amount of spot versus contract business they have. MSI does not expect contract fees to fall back to weak market levels in the pre-pandemic era.
Impact on container line profits
The big question for the lines is when falling freight rates will start to hit profits, which stood at record levels in the third quarter of 2022. ways. Therefore, carriers that have a particular focus on the Trans-Pacific Asia spot business for US trade are likely to come under pressure sooner than larger ones or carriers that have a more diverse cargo base in different regions,” says Richards. Similarly, lines with more contract versus spot load will see greater longevity of earnings.
“You’re looking more towards the middle of next year, for the industry as a whole and that earnings picture to start looking more normal,” he explains. However, this will not be at the level of the ultra-thin margins seen in a few years leading up to the pandemic.
We invite you to listen to the full interview by clicking on the following link: Sea trade Maritime Forecast
Source: Sea Trade Maritime News