Ocean carriers are coming to the realization that the upcoming peak shipping season will likely be a bust. Several carriers have been predicting that the Asia to U.S. market would see a rebound in container shipping during the second half of 2023. It is becoming clear now that the so-called rebound is not going to happen.
Industry experts have also backed off previous projections showing a second half recovery in container volume. The uncertainty in the economy is causing shippers to refrain from placing new purchase orders. This uncertainty will persist until inflation and recession fears are deemed under control. While a slight uptick in container volume is inevitable during the peak shipping season, the uptick in volume will be minimal and short lived.
Without a sustained peak shipping season, the carriers will be hard pressed to secure any additional rate increases or peak season surcharges. This scenario does not bode well for the carriers. They were anticipating a steady increase in the spot rate during the months of July through September. Their strategy will likely need to shift course. Instead of focusing on rate increases, carriers will need to come up with a strategy that keeps spot rates from spiraling downward. The first half of 2023 has put a big dent in carrier profit margins. A further decline in rates will only exacerbate the problem.
Carriers have options at their disposal that can help maintain rates at profitable levels. Carriers have primarily relied on blank sailings as a means to control capacity. This strategy has had minimal impact on rate levels. A more drastic measure would be the decision to remove vessels entirely from the Asia to U.S. market. Such a measure would obviously be viewed very negatively by shippers. It is also likely that any strategy that involves removing vessels would receive heavy scrutiny by the industry.
Shippers can’t control carrier strategy, but they can be prepared. If carriers do end up implementing sweeping actions that address excess capacity, higher spot rates will be the end result. Shippers must be protected by having access to fixed contract pricing and weekly space allocation. Shippers relying strictly on spot rates will have little recourse but to pay the highest rates hoping it secures them space.
