The outlook for the container shipping market in the second half of the year is bleak except for a p

Freight market bleak in second half Linerlines are concerned about deteriorating trade prospects in the second half ofthe year as tight monetary policy dampens consumer demand. Whether there willbe a peak season in the container shipping market this year is still unclear.Drewry said in the latest report that at present, the spot freight rates of thetrans-Pacific route and the Asia-Europe route in the container transportationmarket have returned to the previous level.

At present, the entire container shippingmarket is talking about "normalization", but the pattern of Russianroutes is undergoing a series of changes. Russia's container freight volumethis year may reach a record 7 million TEU, which is becoming a new bright spotin the container shipping market.

Cargo market in the second half of the yearis bleak

Liner companies are concerned about thedeteriorating trade outlook in the second half of the year as tight monetarypolicy dampens consumer demand.

There is still no conclusion as to whetherthere will be a peak season in the container shipping market this year. Theprevailing opinion in the industry is that the "peak season, if there isone", is milder and later than normal. This will put further downwardpressure on freight rates.

In fact, liner lines are said to be alreadylosing money on the trans-Pacific route, while the Asia-Europe route issupported by the Mediterranean market. Analysts said that unless demand picksup sharply, as the 24,000TEU ships delivered in the next few months come intooperation, it is particularly important to point out that they can only bedeployed on the Asia-Europe route at present, which may lead to a downwardspiral in freight rates on this route. .

According to Alphabliner data, THE Alliancewill invest in four new 24,000TEU container ships in phases in July and Augustto replace the 13,400-19,870TEU ships on the FE3 route. Moreover, MediterraneanShipping has recently received several 24,000TEU container ships.

The timing couldn’t be worse for thedeployment of 24,000TEU container ships at the moment, which will put moredownward pressure on freight rates on the route.

In its Asia Pacific market update in June,Maersk noted that growth in the second half of the year is "expected to bemuch slower than the first six months", adding: "While the first halfof 2023 suggests that the global economy as a whole is more resilient thanexpected, the Inflation and monetary policy have analysts worried about thesecond half of the year."

In fact, it is only in the logisticsbusiness that Maersk is optimistic about growth.

Meanwhile, analyst John McCown's analysisof May container throughput at the top 10 U.S. container hub ports showed asharp 20.1% drop in imports to 1,827,627 TEUs compared to May 2022 as demandfell.

Imports from US East and US Gulf ports fell20.7% from the previous year to 897,767 TEU, while imports from US West portsdid slightly better, ending a 23-month streak of underperformance, falling only19.6% to 929,860 TEU.

Russia's container freight volume to reachrecord 7 million TEU this year

For the Russian route, TransContainer,Russia's leading container operator, said a few days ago that container cargovolume may reach a record 7 million TEU this year, which will be achievedthrough the modernization of Russian ports and their railway corridors and thedevelopment of transportation and logistics centers.

Viktor Markov, first vice president ofTransContainer, said that Far East ports and logistics facilities are still astrong driving force for Russia and its transport sector, and it has set anaverage daily target of 6,000 to 6,500 TEU for containers from the Far East,twice the current 2,900 TEU .

He said, "This target is ambitious butachievable. It will be achieved by taking a series of measures to increasefreight traffic by 7% compared to 2022. At the same time, this will also beachieved by using bigger trains and more trains. .”

In addition, the Russian side also plans todevelop alternative routes, especially direct routes to St. Petersburg.

Far Eastern ports have been overloaded inrecent months as a significant portion of Russian freight has been diverted.Based on this, the Russian Ministry of Transport and the railway company RZDhave set up a special office to organize and coordinate container freight atFar Eastern ports.

Some homegrown analysts believe that thesanctions imposed on Russia may actually have had some positive impact on itstransport and logistics sector.

Andrey Severilov, chairman of the RussianFar East Shipping Company (FESCO), said recently at the St. PetersburgInternational Economic Forum that the withdrawal of global liner companies hasled to container shipping becoming a high-quality business for Russiancompanies.

He said, “Cargo volumes in the globalcontainer shipping market have stagnated or even declined, because globally,freight rates have returned to pre-pandemic levels and there is excesscapacity. However, in the Russian container shipping market, the situation iscompletely different.”

Alexei Misailov, director of business developmentat FM Logistics, said that while the average container freight rate fromSoutheast Asia to Europe and the United States has fallen by almost 80% fromits 2022 high, the same is not the case on the Russian route. Due to themassive evacuation of global liner companies, freight rates on Russian routeshave increased by five to six times.

He added: “Now that some newcomers havebeen increasing their capacity deployment, it is difficult for them to meet thegrowing demand for transportation from ports in China and other Asian countriesto the Russian Far East, which has led to price increases.”

According to him, the current freight rateof the Russian route is still maintained at 6,000 to 8,000 US dollars per TEU,which is about five times higher than the freight rate before the epidemic.

Has the container shipping market been"normalized"?

Drewry said in his latest report that atpresent, the spot freight rates of the trans-Pacific route and the Asia-Europeroute in the container shipping market have returned to the level before theepidemic, but the freight rates of other routes and long-term agreements havenot yet fully normalized.

As we all know, as of the end of May 2023,the spot freight rate on the trans-Pacific route has dropped by 80% to 84% inthe past year. But this is a correction to the extremely high freight ratesseen during the pandemic, not a crash. The three major factors driving thesoaring freight rates - lack of capacity, strong demand and port congestion -have now disappeared, so spot freight rates quickly returned to pre-pandemiclevels.

The Drewry World Container Freight Indexshows that current spot freight rates on the transpacific route are about thesame as in December 2019. To some extent, spot rates on the route have fullynormalized. If inflation is considered, it can even be said that the spotfreight rate on this route is lower than before the epidemic.

Spot freight rates on the transatlanticroute are different, still 62% higher than before the epidemic. As of May 2023,freight rates on the transatlantic route have fallen by 47% in nearly a year,and Drewry expects further declines in transatlantic westbound routes in thefuture.

According to Drewry's long-term freightrate data, in May 2023, the Drewry East-West Contract Freight Index (theweighted average of long-term freight rates tracking six major east-west routessince 2016) was 50% lower than in May 2022, But still about 80% higher than inDecember 2019.

Drewry concluded that the long-term freightrate of the east-west route changes more slowly than the spot freight rate.Drewry predicts that in 2024, the long-term association freight rate maycontinue to decline.