The July Horizon Report released by Maritime Strategies International (MSI), a shipping consulting agency, recently depicts the deteriorating outlook for the container freight market.
analysts said that expects the container market to "lose momentum" in the third quarter , "as the lifting of supply chain disruptions and cooling consumer demand leads to a drop in freight and regular charter rates, declined even more in the fourth quarter ."
Although MSI expects freight and charter rates to "stay at the historical level high", , the company said it could drop further.
MSI said: "The downward trend of will continue until 2023, when the market environment is expected to return to a level closer to pre-epidemic levels. The uncertainty of the macroeconomic weakens expectations for further growth in trade."
MSI pointed out that since the beginning of this year, spot freight rates have been spiraling downward, so there is no reason to reverse this trend. " Although the container market has entered its peak season, it now seems that the downward pressure on the epidemic and the continued rise in global inflation levels have dealt a heavy blow to the demand for freight space. " MSI also mentioned the evidence of "oversaturation of warehouses" and "oversaturation of retail inventory".
Currently, several forwarders are looking to store large quantities of goods expected to arrive in the UK during August, in case the distribution centers and retailers warehouses are told to be full.
The report said that the decline in freight rates on major trade routes " prompted liner companies to formulate airline plans to reduce effective capacity and keep freight rates rising ". "'s ongoing supply chain bottleneck" has "disrupted normal shipping schedules and container liquidity ".
MSI said: " inland transportation interruptions have proven to be the biggest bottleneck to slow down the speed of container processing in ports . These interruptions "masking the adverse effects on freight, thus delaying the solution to '."
Nevertheless, the container charter market has not yet felt the impact of weak demand and lower freight rates. “The regular charter market has remained healthy in recent weeks as the ongoing shortage of ship capacity has limited the bargaining power of charterers,” MSI said.
However, there is always a lag between freight and container ship charter rates, just like when consumer demand surged during the pandemic, was slow to catch up with at that time, partly because of the existing regular charter periods.
MSI's outlook forecast for ship earnings, will see a sharp drop in daily rent for ships of all sizes through the first quarter of 2023. For example, the daily rent for a typical 8500 TEU ship will drop by 50% to $80,000 per day from its peak earlier this year.
Usually, ship owners will insist on signing charter contracts of two or more years, so they will not initially be affected by the decline in daily rent.
According to MSI analysts, the crisis will spread to asset value, and the value of the same size of second-hand vessels will fall by half during the same period to around $75 million. Forecasts on falling asset value may curb future trading of second-hand ships. Meanwhile, as the market returns to some form of normalcy, there have been rumors that some new shipbuilding orders have been postponed or cancelled.
Sea Network
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