Speaking at a webinar, Zencargo VP Ocean Anne-Sophie Fribourg retold the familiar story of falling container spot rates through the second half of 2022 as supply chain congestion eased and demand for ocean shipping fell due to lower consumer confidence and high retailer inventories.
Transatlantic rates began to fall late in 2022 and that downward movement accelerated in the first quarter of 2023, said Fribourg, demonstrating a direct impact on rates from increasing market capacity. New vessels entering the market could bring an increase in global capacity of around 8% in 2023, she added.
“I think we are bottoming out, and one of the signs is that since beginning of March, we've seen a surge in demand on Asia-Europe. This has been a bit surprising… a surge in demand for certain products like electric vehicles or solar panels has created a bit of space constraint. Carriers have managed to stop the decrease in rates and even file a small increase on the transpacific due to a massive blank sailing program, and shipping lines are now implementing a GRI.”
Until recently, the general market opinion was that carrier attempts to limit capacity through blanked sailings had little effect.
Asked whether she thought the GRI would be accepted by the market, Fribourg said she saw it as a tactic lines are employing to try and support rates on the transpacific ahead of contract renegotiations which will start in May, but not a sustainable one.
Reducing capacity in the face of rising demand such as on the Europe trades will be an effective method of supporting rates, but there is a limit to how far that can go while maintaining service levels to customers, said Fribourg.
Spot rates are returning to pre-COVID levels almost everywhere, except on the transatlantic trades which have been more resilient due to higher demand owing to a strong dollar and “friend-shoring” by US importers.
“We should see quite a good activity on transatlantic but if the capacity is too high, then we'll see the rates dropping as well,” said Fribourg.
The upshot of current market movements is that customers should look to negotiate longer term rates of at least three months, said Fribourg. “This is the right time because in order to recover operational efficiency and a good service level… we are now in a buyers’ market where shipping lines are looking for volume but we are looking for good service.”
“I think also what is important is to rebuild the relationship between partners. I think through the last few years relationships with the carriers have been damaged because of all that has happened. There is a need to rebuild relationships, be consistent, commit and deliver from both parties,” said Fribourg.
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