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Shipping capacity

Data from the shipping data professional organization Xeneta shows that the spot price for shipping a standard 40-foot container from China to the US West Coast this month is $1,444, far below the peak of $9,682 in March last year, when shipping delays and long queues of container ships during the worst period of the COVID-19 pandemic had also dissipated.

The Kiel Institute for the World Economy in Germany said that although freight volume rose 2.1% month-on-month in January, it was still down 5% from the same period last year, mainly due to reduced product demand as several economies experienced high inflation and central banks raised interest rates, impacting consumer spending. Although the unblocking of many countries has also led people to expand their spending on services, demand is expected to remain weak this year due to persistently high inflation and further interest rate hikes by central banks. Maersk predicted that container demand will decrease by 2.5% this year.

Standard & Poor's monthly survey of purchasing managers also showed that new export orders around the world have been declining since the second half of last year and in January this year. So

me economists say that although China has optimized its COVID-19 policies and opened up, weak demand in other regions will continue to suppress trade demand.

To avoid further drops in shipping fees, shipping companies are also canceling voyages or temporarily suspending operations. According to data from eeSea, carriers canceled or skipped 1,639 stops between East Asia and Europe, or between East Asia and North America last year, a 40% increase from the previous year.

However, the decline in freight volume also poses a problem of excess shipping capacity for shipping companies. During the pandemic, many shipping companies invested in building new ships. Jonathan Roach, an analyst at shipping broker Braemar, pointed out that as of last month, the total shipping capacity of new ships being built had reached 30% of the current global shipping fleet capacity, up from 13% in January 2019. The delivery of new ships may further increase excess shipping capacity and further suppress shipping prices.

In the future, shipping companies may resort to the strategy they used in the early stages of the COVID-19 pandemic - idle many ships to create favorable supply and demand capabilities. Practitioners who rely on container shipping are worried that the market's bargaining power has shifted to shipping companies in the long run.

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