Geopolitical
risks are impacting the supplier strategy of many companies globally. While majority (63%) of the
companies surveyed by Container xChange in the month of February’24 are looking
to diversify their supplier portfolio, 37% are still going to reduce the number
of suppliers they aimed to diversify in the year 2021 in response to the
pandemic and its resulting repercussions.
“We are
uncertain about who to partner with and who to discontinue our associations
with. The situation is getting trickier for us as freight forwarders due to
the ongoing war in the Middle East, leading to fewer partners in the east. The
risks of sanctions and increased uncertainty are significant factors driving
our need for trusted partners.” – A freight forwarder from the USA and a
Container xChange customer
The
month of February 2024 marked a pivotal moment in the trajectory of container
leasing and trading rates, which had been on the rise since past three months
(starting November 2023), coinciding with the onset of the Red Sea crisis. This
inflection point closely aligned with our forecast from the preceding months,
as Container xChange had anticipated a reduction in demand and subsequently a
reduction in average container prices and leasing rates post Chinese New Year.
As the
Chinese New Year holiday period concluded and business activities resumed, the
rates failed to sustain their upward momentum.
Our forecasts predict that the
container prices will fall by a measure of 8-16% in the coming two months
(March and April 2024) in China going by the cyclic nature of price
developments as an impact of the post Chinese New Year demand reduction. We
also foresee potential decline in container prices across the United States,
ports of Vancouver and Toronto, and in Europe in the coming two months.*
On
November 19, Iran-backed Houthi forces began attacking shipping vessels
affiliated with Israel passing through the Red Sea. 102 days later, the shipping industry has emerged from this crisis
better prepared than many had predicted. As the industry typically responds
to such crises, the initial impact was felt on rates. Freight rates immediately
and persistently jumped as the world entered the last month of 2023. This
timing also coincided with the pre-Lunar New Year rush, which builds up in
January and culminates in February. Consequently, the freight rate boom
continued well into 2024 as shippers aimed to deliver cargo for the cyclical
demand, known as the pre-Chinese New Year rush. Following the conclusion of the
Chinese New Year on February 24, 2024, signs of fading demand and falling
freight and container rates began to appear.
A
continued decline in rates is expected, although not crashing. Freight rates
typically fall by 30% every year from February to March and into April.
Similarly, container rates are expected to fall by a measure of 18-6% depending
on locations, with a higher percentage of decline expected in Asia.
Over the last 30 days (February
2024), container prices rose by 10% in Northeast Asia, 7% in Oceania, and 2.5%
in Southeast Asia, remaining stable in North America. However, prices declined
in Europe (5-7%), Japan and Korea (5%), and the Middle East and ISC region (2.4%).