Container freight market normalisation is ‘not really normal’

Barry Parker | May 18, 2023

"Then again, it's not really normal," was the Xeneta Chief Shipping Analyst's message in a State of the Ocean Freight Rates webinar on 17 May.

Sand had been describing a situation where the spreads between rates from the Far East into the US East Coast were just shy of $1,000 per feu above the comparable rates into the US West Coast. The maths - $2,424 per feu USEC minus $1,459 per feu USWC - bring the result back nearly to the "normal" relationship prior to the pandemic-induced disruptions that rocked the markets starting in mid 2020.

Related: Some European container export routes yet to normalise

All of this comes against the backdrop of an overall rate softening from the highs seen throughout 2022 - the spread on Asia to USWC and Asia to USEc, "normally" at a $1,000 per feu level, had ballooned out to $4,000 per feu in late 2022 as USWC rates plummeted while the USEC gained in strength.

"I dare you to believe that we are all in a normal market," Sand said, citing "still no [US West Coast labour] deal, a lot of re-routing, and perhaps only upside seen from lower demand…we have not really seen any solid clearance of the obstacles that caused the problems during the Covid years." At present, he cited congestion on the US West Coast coming down from the horrendous situation in late 2021, early 2022, but said that it was still elevated.

Related: Container market 'normalisation' underway: Bimco

Sand, in his presentation, pointed to the shift in cargo moving into the US East Coast as being of a longer-term nature, citing investments in infrastructure - "giants cranes and terminals being set up" - and warehousing, a trend that begin in advance of the widened Panama Canal, which opened in 2016.

Sand's co-presenter, Xeneta Market Analyst Emily Strausböll, summed up the present situation nicely, telling webinar listeners "the volumes [of cargo to the USWC] have not necessarily shifted back…in spite of congestion, the biggest cause of the initial shift…having come down."

But still, reinforcing the tone of a more permanent longer-term shift to USEC, Strausböll said, "Many of the shippers that we speak with on a daily basis have also confirmed that, yes, they used to go primarily to the West Coast, but they’ve shifted to the East Coast and are not planning on moving back. Even if the threat passes on the West Coast, they are not going back- they’ve found solutions that they’ve taken to their consumer base."

Sand also commented on various ongoing US legislative initiatives: "If you look further ahead, you will also know of infrastructure investment packages coming from Capitol Hill". Commenting on the actual benefits that will accrue to ports, inland connectivity and efficiency of supply chains, he said, simply, "it remains to be seen". He quickly added that: "Lots of it is plugging holes that should have been plugged a long time ago. But at least compared to no infrastructure package at all, it's a move in the right direction."

Looking at markets and based on Xeneta data and Sand highlighted moves from Asia into Manzanillo, WC Mexico. He said: "Volatility is the name of the game going forward." Turning to moves from Asia into the USWC, he showed spot rates rising from $2,000 per feu in March, to $3,000 per feu in mid-May the $1,000 spread referred to earlier even through carriers had announced General Rate Increases only $400- $500 per box.

Reliability of carriers at a time, now, with very few "blanked" sailings, and a component of "normality" was also discussed, using data from Sea-Intelligence. On the Asia to USWC runs, reliability was estimated at 42.2% - meaning arrivals within one day of the scheduled arrival time. "Those ships arrive, on average, five days late," he said.

Commenting on the USEC, Strausböll noted that reliability had deteriorated, as the ports were overwhelmed, but she said that it has now improved, though it's still under 50%, compared to a global reliability number of 62%, "not where it should be, but getting better now."

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Container freight market normalisation is ‘not really normal’