Peter Sand, the chief analyst of Xeneta discuss recent trends in the container shipping market, from plunging spot rates to blank sailings.
The container shipping market has enjoyed a prolonged historic, and somewhat unexpected bull run, as COVID-induced consumer spending broadly switched from travel and entertainment to manufac-tured goods. But as COVID restrictions fade and inflation rages, the tides are changing, resulting in turmoil across many container shipping sectors.
“Let’s focus on the Transpacific because that's where things are most crazy right now,” said Sand in an interview with Maritime Reporter TV. “Carriers are literally blanking sailings left, right and center from Asia into North America; it’s 50% of announced capacity in the second week of October. So it's it's bloody out there, and we see rates coming down two-thirds from the peak that we saw earlier in the year.”
While rates are plunging fast, Sand adds perspective: “We still have to realize that they are still double up from where they were pre-pandemic.”
COVID: The Sledge Hammer
The current situation in the container shipping market has long roots to the beginning of COVID, when carriers slashed capacity based on uncertainty in demand. As the capacity to carry dropped and de-mand for good unexpectedly and rapidly rose, so too did rates. But today is a different story, with in-flation raging, Central Banks globally pushing interest rates up rapidly, stores packed with too many goods as spending patterns shifted quickly back to travel and entertainment and carriers left with too many ships to carry too few goods.
“We have seen rates decline on the main trades out of Asia, into North America, into Europe since the early parts of this year,” said Sand. “So it was not a surprise, but all of a sudden it just escalated.”
This escalation has, ironically, put shippers in the driver’s seat on rates during what has traditionally been the peak season for containership. “Especially the spot market on main trades right now finds itself at approximately half the price of where some of the most recent long-term contracts have been fixed, according to Xenata data.,” said Sand.
Watch more: To see Sand’s evaluation of the container shipping market trends, including the future of ports congestion, watch his interview on Maritime Reporter TV: