Freight forwarders confirm Business Slowdown in Q2; Shipping industry faces further rate corrosion

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Majority of freight forwarders surveyed confirm business slowdown in Q2’23 but are hopeful for better demand betting hopes on the peak season.

A recent survey conducted among freight forwarders by Container xChange, an online container logistics company, reveals a prevailing sentiment of caution and concern amongst the freight forwarders globally.

The survey also shed light on forwarders' expectations for the future, with 64% expressing hope for an improvement in their business, while 15% remained uncertain, and 21% held a downbeat outlook on business revival.

In addition, the survey highlighted a concerning trend in container prices. June 2023 marked the lowest average container prices in key supply chain markets such as China, Europe, and the US, when compared to the same month in 2022 and 2021. This decline in container prices could indicate a further strain on profit margins for shipping companies.

To further understand the market situation, Container xChange studied the performance of shipping industry and how container movements have fared over the first half of the year 2023. 

“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.” Said Christian Roeloffs, cofounder and CEO of Container xChange.

A study of how average container prices have developed for standard containers (new and cargo worthy) in the second quarter of 2023 (April-June), shows that most of the regions witnessed continued price slides or marginal price rises for standard containers. Q2 witnessed no significant uptick of average container prices, for both new and cargo worthy containers.

A lookback from the Q2 2023 of average container price development (referred to as delta in the chart below) on key routes shows that only the Northern Europe and Middle east and ISC region saw marginal increase in these prices, rest being negative for standard containers. 

As the world looks up to America for consumer demand, amidst rising prices, inflation and wage wars, the average container prices indicate no sign of revival. This in turn leads us to think that the demand for cargo or the need to reposition empties back to Asia is no longer pressing in that region. 

The chart below shows how average container prices have developed since 2021 at the key ports in the U.S.

China, the most important destination for the westbound trade also provides no clear signal of demand revival for containers. The chart below shows the price trend for average container prices since 2021 in the month of June. 

Peak Season Demand forecast survey 2023 by Container xChange

We asked the freight forwarders globally if their business slowed in the second quarter of 2023 as compared to the first quarter. And the majority, around 65%, responded with affirmation that their business was hit in the second quarter, while 19% confirmed that it remained the same with no uptick in business. Only 16% confirmed that their business was higher than before.

When asked if freight forwarders expect their business to pick up as the peak season approaches, 64% confirmed that they do expect an uptick while  21% said they do not expect a business boost, while 15% are unsure due to so many disruptions that have clogged the view. (See chart below) 

Another indicator of subdued expectations from the coming invisible peak season is that the majority of freight forwarders confirm that they have experienced decrease in customer demand and customer activity in June.

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