WITH the Chinese New Year holidays now under way, carriers will be reflecting on the weakness of the market, after bookings failed to merge in the traditional runup to the factory shutdowns.
Chinese New Year has been seen as the final proof that demand has fallen off a cliff for carriers, after the volume surges of 2021 and 2022 that drove up freight rates.
But despite what have appeared to be aggressive capacity cuts in the past few weeks, container lines have failed to raise lift rates at all in the run up to this year’s holiday season.
“The data is very clear: there has been almost no usual rate peak leading up to Chinese New Year 2023,” said Sea-Intelligence chief executive Alan Murphy. “There has been some marginal increase, but seen in the context of the normal market seasonality, the only viable conclusion is that there has been no new year peak season, and that the underlying market conditions have remained extremely depressed right up to new year 2023.”
Demand data was a lagging indicator, he added, but the weakness of demand could be seen in both the lower rates achieved and the dramatically increased levels of blankings.
“Spot rates typically increase in the lead-up to Chinese New Year,” he said. “How much they increase by differs a bit from year to year, but the increase seen in 2023 is much less than what is normally seen. The minor increases in recent weeks therefore do not signal strength at all, but merely underscore just how pressured the market is.”
The increase in blankings booked for the weeks following the holidays were “better late than never”, but would not necessarily improve conditions.
“Looking at the share of capacity which has been blanked, the key Asia-northern Europe and Asia-North America west coast trades are in broad strokes now experiencing similar capacity withdrawals, as we saw when the pandemic first hit the market after Chinese New Year in 2020. Whether this level of capacity withdrawal will be sufficient to stabilise the market remains to be seen, especially as the carriers are now also faced with substantial deliveries of new vessels in 2023.”
Figures from Linerlytica indicate that capacity on the transpacific and Asia-Europe trades is down 7% on last year, but that the reduction has been insufficient to prevent rates sliding.
“The misplaced focus on blanked sailings rather than on actual capacity provided has given rise to the misperception that carriers have pulled out more capacity than is actually the case,” Linerlytica said. “Blanked sailing measures do not account for new services launched, ad-hoc extra loaders, capacity upsizing, vessel sliding and bunching, all of which have opposite effect of raising the actual capacity available in the market.”
More permanent capacity cuts would be required in 2023 as blanked sailings alone would not be sufficient to lift the market in the face of softening demand, it added.
Transpacific spot rates slipped further on the last week before the Chinese New Year, with rates to the US west coast falling by 2.5% to $1,378 per feu, while Asia Europe rates fell to $1,020 per teu. “Rates are expected to resume their weekly falls in February as demand weakens,” Linerlytica said.