26 October 2023

International Market Update

General Market Update

• Demand for shipping services is growing more slowly than available shipping capacity
• Freight rates have fallen 60% year on year and continue to in response to excess capacity
• Capacity cuts and blank sailings are becoming the “norm” as carriers look to balance networks

July to September Quarter Reflection:

The July to September quarter did not see the peak in demand volumes that are usually seen in prior years. Prompted predominantly by improved customer inventory management and a subdued growth environment following the pandemic-fueled years.

Seasonal demand progressively weakened moving through September leading up to China’s Golden Week holiday, (starting 29 September), pushing SPOT rates down and increasing the frequency of blank sailings from carriers in response to weakening demand. Ocean freight rates continued to sink, despite capacity cuts, reaching their lowest levels since 2019. The industry faces challenges with declining ocean rates, while a cautious approach is taken regarding peak season prospects.

October to December Quarter Outlook:

The October to December quarter has started slowly as China returns from Golden Week celebrations. Many customers held back orders, and orders that were placed are, in most part, pending ETDs out of main China ports as at early to mid-October. We predict many carriers will be using this quarter to balance the network, considering forecast reductions in demand and a reduced workforce, to handle cargo operations and foresee FAK rates on North East Asia to East Coast routes increased by the major carriers to improve operational profitability.

Innovation

The decarbonisation journey pushes box ship orderbooks to new heights with:

• A surge in container ship orders for eco-friendly vessels
• 187 new ships were added, creating 1.75 million twenty-foot equivalent unit (TEU) capacity in 2023
• Orderbook reaches an all-time high at 7.88 million TEU (29% of the fleet)
• Methanol and LNG-powered ships dominate, accounting for 83% of ‘green’ vessels
• Major players like CMA CGM, Evergreen, MSC, and Maersk invest heavily
• Challenges in alternative fuel procurement persist