Container ship markets are still enjoying “exceptional” conditions despite some headwinds and a fall in trade.
Clarksons Research analyst Trevor Crowe said that the near-term outlook remains highly positive for owners.
“Vessel availability is still scarce, and crucially port congestion shows no sign of material easing,” he said.
It is 19 months since the Shanghai Containerized Freight Index (SCFI) first moved into new record ground and 13 months after the charter market passed the previous 2005 record high.
“Despite growing headwinds facing trade volumes, the container shipping markets (and costs for shippers globally) remain firmly in exceptional territory,” Crowe argued.
Though some easing has been apparent, severe port congestion continues to drive major market “disruption upside”, he believes.
The UK company reported a lack of momentum in the container ship charter market following many shipping players decamping to Greece for the Posidonia event.
Rates in the feeder sizes softened marginally again but remain at extraordinarily high levels.
The six to 12-month assessment for a 1,000-teu boxship was only down 1% in the week ending 10 June at $35,750 per day.
In 2021, the perfect storm of a firm rebound in volumes — up 6.3% after the initial impacts of Covid-19 in 2020 — major logistical disruption including severe port congestion, and moderate supply growth, drove the markets well beyond previous record highs.
Volumes shrinking
So far in 2022, container trade has taken a step back, with volumes 2.4% down year-on-year between January and April, according to Clarksons Research figures.
This is still up 4.3% on 2019, however.
“Port congestion has not only mitigated the impact but also maintained markets at spectacular levels,” Crowe said.
Clarksons’ container ship port congestion index averaged 36.5% of capacity at port in May, close to the October 2021 record of 37.1% and about 5% above the 2019 pre-Covid average.
Knock-on effects from the Russia-Ukraine conflict, Covid restrictions in China and ongoing disruption elsewhere have all contributed, reducing available capacity.
Though benchmarks vary, container spot freight rates remain relatively close to the record highs seen in early 2022, far ahead of pre-Covid levels, Crowe explains.
Still well above 2019
The key SCFI indicator averaged 4,162 points in May, having eased 18% lower than in January 2022, and the lowest level since July 2021.
But this is still five times the 2019 average, with some reports of long-term rate ideas still firming.
The container ship charter market has remained even closer to the peak.
Clarksons Research’s time charter index hit a new record of 434 points during March.
The average across May stood at 422, just 3% lower, and an “astounding” seven times up on 2019, Crowe said.
“Of course, demand side headwinds are building,” he added.
The analyst pointed to macroeconomic pressures growing, with 2022 global GDP forecasts cut by more 1% compared to before the Ukraine war.
Inflation is driving a cost of living crisis affecting consumer activity, Chinese lockdowns are having an effect and some consumer spending is switching back to services.
Growth downgraded
This all weighs on box trade, with Clarksons’ 2022 container cargo growth forecast downgraded to 1.3% from an initial 3.8% in January.
Looking further ahead, following record ordering of 6.5m teu since the fourth quarter of 2020, the orderbook is now 29% of fleet capacity.
Supply growth is set to accelerate, with Crowe projecting 8.3% in 2023 and 7% in 2024.
“At some stage one might reasonably expect to see some congestion unwind, easing capacity shortage,” he said.
