[Freightos Weekly Update] Special TPM ‘23 dispatch

Ocean rates:

• Asia-US West Coast prices (FBX01 Weekly) decreased 6% to $1,164/FEU. This rate is 92% lower than the same time last year.

• Asia-US East Coast prices (FBX03 Weekly) fell 1% to $2,597/FEU, and are 85% lower than rates for this week last year.

• Asia-N. Europe prices (FBX11 Weekly) dipped 2% to $2,617/FEU, and are 82% lower than rates for this week last year.

Analysis

This year’s TPM was a combination of post-pandemic debrief, projections for the rest of the year and beyond, and sharing of lessons learned.

Overall, the sentiment was that things are finally heading back to normal though accompanied by a healthy dose of uncertainty as shake ups in carrier alliances and strategies, a looming surge of new vessels adding capacity to the market, and economic wildcards that could impact consumer demand make the future somewhat murky.

In the debrief department, Sea Intelligence’s Alan Murphy shared data confirming that – of course – surging demand was the trigger for the unprecedented ocean situation.

But it was the record number of vessels that carriers shifted to satisfy the demand that caused the congestion – which, as Wan Hai’s Vice Chairman, Randy Chen put it, “broke the system” – which was the actual big driver of extreme rates and dismal reliability.

As volumes and congestion have eased though, Sea Intelligence data shows that reliability is improving (though still not great) and utilization levels are back to pre-pandemic levels which in turn are driving the decrease in rates.

Looking ahead, ocean freight maven Lars Jensen of Vespucci Maritime encouraged attendees not to fear: He sees the last years as remarkable, but also views the current ocean environment as quite normal in that normal ocean freight market dynamics are back to determining the trends.

Rates are falling back to pre-pandemic levels or below – this week’s transpac rates are back to about $1,100/FEU to the West Coast – because the market is now in a down cycle, just like it has been many times in the past after an inventory build up and before an inventory correction.

He continued that the downturn may be painful (for some), but is not unusual. Likewise the current environment of excess capacity and rate war makes sense while inventories are still high, volumes are low and carriers – in the bumpy “period of instability” ahead of alliance shake ups – have cash reserves to support a push for market share. Jensen thinks carriers are willing to compete relatively strongly on price until the most likely (though not certain) scenario of rebounds in demand and rates starting in the spring.

Other experts expressed how current rate levels are also seen as complicating long term ocean contract talks, many of which were taking place this week. And though some shippers are fighting hard to lock in volumes at a discount, some talk of slightly higher contract rates in return for reliable capacity – after so much volatility during the pandemic – are also part of the discussion.

Finally, tech also played a more prominent role in the narrative than it has in the past. Many in the industry viewed the pandemic as a catalyst for tech adoption in freight, and think the easing of operational pressure will lead to more focus on neglected digital initiatives.

In addition to digital connections that can facilitate operational aspects like tracking visibility and eBooking, or pricing visibility that can help shippers or forwarders make better spot decisions or more reliable contracts, CN CEO Tracy Robinson explained that “no one wants to be surprised.” And the way to avoid surprises is through better data and better data sharing.