For the past two years, the global container shipping industry has seen record profits, as high demand and tight capacity kept prices escalated, but prices have now fallen by 50% into Q3 and forecasters expect rates to continue to normalize into 2023. Our Q3 2022 Retail Sourcing Report provides in depth analysis of container shipping rates and other variables impacting retail global sourcing, to allow you to make informed decisions moving forward.
Container shipping rates showed signs of easing late in the second quarter and into Q3, even though import volumes from Asia remain high. Following pandemic related interruptions through June, the port of Shanghai handled 4.3 million TEU in July, a monthly record. Surging global inflation and recessionary fears across Europe could mean price swings through the remainder of 2022 and into the busy Chinese New Year season. Some analysts predict that as spot market prices fall below contracted prices on some routes, ocean carriers could face pressure from customers with long-term rate agreements to re-adjust their rates. Many shippers that committed to contracts at considerable premiums have grown frustrated as they’ve seen falling rates on the Asia-Europe and trans-Pacific. Tensions between carriers and shippers could escalate – especially given the record profits that carriers have seen over the past 2 years.
Asia to North Europe Trade Lanes
Shipping carriers have kept contract rates at elevated levels, especially on the Asia-to-Europe Lane through carefully managing capacity. Asia to North Europe rates have remained stable since early May, partly due to congestion at European container hubs. While contract rates remained firm, spot rates have softened. Generally, contract rates follow spot rates in the short term. After falling nearly 30% since January, spot rates to North Europe reached their lowest level since September 2022. Strikes by dockworkers at German ports at Felixstowe, the UK’s largest port and in related sectors are also impacting container flow. Assuming European economies continue to contract on surging inflation, we could see carriers adjusting their capacity in response to these downward rate swings.
Asia to North America Trade Lanes
While some ports on both coasts of the United States are reporting record volumes, others have noted declining cargo volumes this year. This is due to congestion and delays in China and delays at ports on both the East and West coast of the U.S. Declines in spot rates and in the premiums being charged on many trade routes in Q2 are now reversing into Q3 as demand for containers picks up again heading into the busy pre-Christmas season. Dramatically high container shipping rates eased off by 30 -50% in some cases as demand for shipping decreased as consumers and shippers were more cautious about spending. Spot rates for shipping a 40-foot container from China to the U.S. West Coast went from $15,255 at the end of April to $7,568 in early July (Freightos). Threats of strikes by West Coast dock workers and by rail worker unions has also caused volatility for cargo moving through U.S. ports. Most forecasters expect that we will see volatility through the remainder of 2022 and through Chinese New Year of 2023.
All these issues and more are covered in the most recent CBX Q3 2022 Sourcing Report. To learn more about how to address some of these concerns with the CBX platform, feel free to contact us directly.