Transportation & Logistics Analysis

The shipping companies prepare for market turnabout

September 06 2022

Subscriber content only

BAROMETER. August results have confirmed the fall in Western demand and the drop in spot rates for goods from China.

The trends seen in July on the container shipping market were confirmed in August. Demand slowed, reducing spot freight rates, particularly for goods from China. The climate is morose in this post-sumer holiday period, which is characterised by economic uncertainty, war on Europe's doorstep and cost of living hikes, without mentioning the possible risks still posed by the pandemic, which is still very much present.

The spectre of recession

This anxiety-generating cocktail has brought politics back to the fore in Western democracies, which, faced with the authoritarian regimes which form an essential part of globalised economy, need to reflect with some urgency about the kind of society they want to build for the future. French president Emmanuel Macron, who warned that the world was faced with "the end of abundance" and "a certain sort of carefreeness", predicted a "major change of direction". German chancellor Olaf Schulz shares this viewpoint. Both used strong words. They said that the globalised world economy, as we have known it over the last 30 years, has come to an end without anyone knowing at this stage which model we wanted to replace it.

In the short term, if we continue to use the terms currently in vogue, "sobriety" is the watchword in this post-holiday period, particular with regard to energy. But another much more worrying word is starting to look in the background: recession.

Managing the fall in freight rates

Faced with this clearly visible structural uncertainty, the regular shipping line sector is navigating by sight. It is already expecting a complicated 2023 and is trying to ensure that the second half of 2022 is as profitable as the first. From this latter point of view, it is already well-placed to achieve its goal, thanks to clever management on the part of the shipping companies. They need to amass as much profit as possible before the storm breaks, while, at the same time, showing a certain sense of responsibility, by contributing to the fight against inflation. They can now point to a very real fall in spot rates for goods coming out of China…They have communicated well on this subject, but it should be recalled that these spot rates only account for 10-15% of total cargo volumes. Contract rates, meanwhile, are three times higher than they were before the pandemic.


Subscribe to the newsletter

Expert in Ocean shipping for 25 years, Jerome puts all his knowledge of the industry to contribution for Upply. Ship captain at heart, he has written the English-French Lexicon of Containerized Shipping (Paris: CELSE, 2001).
See all its articles