2023 likely to see container “price war” where prices plummet

Shipping and container costing experts are predicting a bullwhip effect in the industry in 2023 where, far from the spiked prices of 2021 and 2022, the prices are predicted to plummet “down to almost variable costs.”

Container Xchange Co-Founder and CEO Christian Roeloffs wrote this week “In 2023, there is a high possibility of an all-out price war. It doesn’t seem that the capacity restrictions that we have seen in the past two years are due to return, so we’ll just have ample capacity both on the vessel as well as on the container side. With the competitive dynamics in the container shipping and liner industry, I don’t expect especially the big players to hold back, and we do expect prices to come down to almost variable costs. We also foresee market consolidation.”

There are already reports that some logistics giants are teetering on the brink. China United Lines, an emerging business handling transpacific and Asia to Europe trade is one such business said to be at risk of default.

The tight capacity of 2022 and subsequent hike in rates has now largely disappeared, as this Drewry live chart illustrates. Far off the near $10,000 rate for a 40ft container in January, today the price is hovering closer to $2,200.

As with product, there now exists and oversupply of containers as the supply chain grapples with having delivered, but not sold through a glut of stock.

Shipping lines continue to reduce vessel capacity and suspend services by considerable blank sailings. In a recent advisory, Maersk indicated that it will continue to ‘make capacity adjustments on services from Asia to North America, Europe and the Mediterranean to better align with demand fluctuations.’ Container Xchange said that it observes a similar trend echoing in the industry.

“Into the year 2023, freight forwarders will be able to go window shopping quite a lot, and there’s going to be a lot of room for negotiation, especially in the early parts of the year. Contract rates will follow suit as spot rates fall significantly.” Roeloffs added.

“We will continue to see efforts towards diversification of supply chain sourcing and manufacturing out of China. This is a long-term view, and it will need vision and strategy from companies looking for a more resilient supply chain. We will witness increased container volumes intra-Asia and more countries will emerge as potential alternatives like Vietnam, India and more.

“In such an environment where there will be tighter margins for freight forwarders and traders, the cost is going to be everything. Leaders will look for ways to efficiency and business sustenance. Technology offers a great opportunity for leaders to minimise risk with data visibility and transparency while also maintaining a healthy partner portfolio that helps greatly in testing times.

“Tight grip on costs becomes paramount for freight forwarders into the year 2023. While on one hand there will be a great deal of negotiation with shipping lines and on the other hand, operational cost optimisation will be crucial for the forwarders. There will be careful monitoring into the demurrage and detention charges for instance, insurance charges, claims etc. As capacity on the ocean side becomes more abundant, there is a valid business case for using SOCs which not just offer flexibility but greater control to the forwarders,” said Dr. Johannes Schlingmeier, cofounder and CEO, Container xChange.

A more detailed report can be downloaded here.