Ocean freight rates stop falling in January

BAROMETER. Ocean freight rates seem finally to be stabilising after plunging steadily over the last six months, but only thanks to wide-ranging cancellations of port calls.

The first half of 2023 looks likely to be complicated for the shipping companies, as their weekly financial results collapse under the impact of falling freight rates and cargo volumes. In this situation, they cannot remain inactive.

January was marked by three main factors:

• MSC and Maersk announced that they would, in effect, be separating in 2025, lending credit to the alliance implosion theory we referred to in Our Three Scenarios for Container Shipping. Reconciling two divergent strategies while continuing to use the same alliance-based operating system became increasingly complicated. Things needed to be changed, therefore, and this was finally made possible by the growth in size of the two groups and their improved finances.
• Prices seem to have reached a low point, even if MSC is still behaving very aggressively as it looks to fill the capacities of its large fleet. These levels are still too low to sustain a high quality of service but, with contract negotiations under way, it is tempting for shippers to take advantage of the current market trend.
• A generally low quality of service, as just a few ships continue to sail at slow speeds, against the background of an extended Chinese New Year holiday, low demand and a reduction in production resulting from a sharp increase in Covid cases.