Posted July 17, 2023

Q2 rates erode for freight forwarders  

The majority of freight forwarders surveyed confirm business slowdown in Q2 but are hopeful for better demand betting hopes on the peak season. A recent survey conducted among freight forwarders by Container xChange, an online container logistics company, reveals a prevailing sentiment of caution and concern amongst the freight forwarders globally.

The survey also shed light on forwarders' expectations for the future, with 64% expressing hope for an improvement in their business, while 15% remained uncertain, and 21% held a downbeat outlook on business revival.

  • Key findings:
  • 65% of freight forwarders confirm Q2 was a ‘slowdown for their business’ as compared to Q1 (of 2023)
  • 64% of freight forwarders surveyed in July, hopeful of their business to improve. 15% unclear, 21% downbeat of business revival
  • In June 2023, container prices reached their lowest average compared to June 2022 and June 2021 in key supply chain markets including China, Europe, and the US.
  • Shipping industry enters Q3 with continued rate corrosion, as negative market sentiment persists ahead of the ‘invisible peak season"

The survey highlighted a concerning trend in container prices. June 2023 marked the lowest average container prices in key supply chain markets such as China, Europe, and the US, when compared to the same month in 2022 and 2021. This decline in container prices could indicate a further strain on profit margins for shipping companies.

To further understand the market situation, Container xChange studied the performance of shipping industry and how container movements have fared over the first half of the year 2023.

“The year 2023 started with significant oversupply of containers and high uncertainty in the market – which led to substantial rate erosion," said Christian Roeloffs, cofounder and CEO of Container xChange. "The average container prices have been freefalling and there are no signs of revival as we approach the busiest period in the shipping industry. It is quite evident that the peak season is almost invisible.” 

A study of how average container prices have developed for standard containers (new and cargo worthy) in the second quarter of 2023 (April-June), shows that most of the regions witnessed continued price slides or marginal price rises for standard containers. Q2 witnessed no significant uptick of average container prices, for both new and cargo worthy containers.

A lookback from the Q2 2023 of average container price development (referred to as delta in the chart below) on key routes shows that only the Northern Europe and Middle east and ISC region saw marginal increase in these prices, rest being negative for standard containers.

As the world looks up to America for consumer demand, amidst rising prices, inflation and wage wars, the average container prices indicate no sign of revival. This in turn leads us to think that the demand for cargo or the need to reposition empties back to Asia is no longer pressing in that region.

China, the most important destination for the westbound trade also provides no clear signal of demand revival for containers. The chart below shows the price trend for average container prices since 2021 in the month of June.

Peak Season Demand forecast survey 2023 by Container xChange

Global freight forwarders were asked if their business slowed in the second quarter of 2023 as compared to the first quarter. And the majority, around 65%, responded with affirmation that their business was hit in the second quarter, while 19% confirmed that it remained the same with no uptick in business. Only 16% confirmed that their business was higher than before.

When asked if freight forwarders expect their business to pick up as the peak season approaches, 64% confirmed that they do expect an uptick while 21% said they do not expect a business boost, while 15% are unsure due to so many disruptions that have clogged the view. (See chart below)

Another indicator of subdued expectations from the coming invisible peak season is that the majority of freight forwarders confirm that they have experienced decrease in customer demand and customer activity in June.

Recap of H1 2023

With the start of 2023, the shipping industry had high hopes of a return to normalcy as China emerged from COVID lockdowns. Our Chinese New Year report in February 2023 indicated that container prices were stabilizing, raising expectations of a revival after a prolonged period of price lull. Carriers focused on repositioning containers from Europe and the US back to China, a cyclical practice.

Container xChange's Container Price Sentiment Index (xCPSI), a tool to gauge industry sentiment, shifted from negative to positive after the Chinese New Year, reflecting industry professionals' optimistic outlook.

However, an oversupply of containers led to depots working at maximum capacity, hampering container movement and reducing depot efficiency. This situation affected depots more in terms of operational inefficiencies than revenue generation.

By the end of Q1, North America witnessed the largest decline in average prices for 20 ft dry cargo containers, followed by the Middle East, ISC region, and Southeast Asia. Despite this, our peak season expectations survey in April still indicated positive sentiment towards a demand bounce back.

The economic and geopolitical scenario deteriorated in Q2, with a banking crisis hitting an already struggling economy grappling with inflation and recession concerns.

By June, the Eurozone had entered a technical recession, and the US faced record-high inflation since 2022. Public sources predict a further 4.5% price drop in the US in 2023.

These events created a ripple effect in the shipping industry, leading to significant fluctuations in shipping container prices."