Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
Copyright: https://www.joc.com
Have demand and ocean freight rates collapsed in recent months? First, it is worth asking whether the question is even relevant. “Collapse” is merely a descriptive word. Much like asking whether the glass is half full or half empty, it does not matter if we can objectively measure it and say the glass contains exactly half a liter. Similarly, we can measure the amount of TEUs shipped, and there is plenty of freight rate data available as well.
The point where words and phrasing become a factor is in the negotiations between shippers and carriers. The general sentiment of the market does have an impact on the negotiation positions taken by both sides, and hence there is an impact.
Can we say the market has collapsed? In this regard it becomes important to consider the comparative base.
Let us contemplate spot rates as a gauge of collapse first, using the spot rates as measured by Drewry’s World Container Index for this purpose. Rates from Asia to the US West Coast have dropped 86% since peaking in late 2021 and Asia to North Europe is down an even more impressive 91%. Such numbers, seen without context, could certainly warrant the term “collapse.” But as is also evidently obvious, this is a skewed comparison as the rate level at that time in 2021 certainly could not be considered normal.
If we instead compare with the corresponding week in 2019 before the pandemic, we find that the Asia to USWC rates are 17% higher and the Asia to North Europe market is a scant 1% lower. If we look at the Asia to Mediterranean, it is even more interesting as the spot rates are still 50% higher than pre-pandemic. Seen in this context, rates have certainly not collapsed. However, when also keeping in mind cost inflation in the world over the past few years, it also becomes clear that these rate levels certainly do leave the market at a weaker state than pre-pandemic. But perhaps “collapse” is too strong a term.
Looking at demand, the same issue arises. Using data from Container Trade Statistics, the number of containers shipped from Asia to North America has shown year-on-year declines in the range of 15% to 29% in the past nine consecutive months, if the Chinese New Year effect is taken into consideration. This certainly sounds like a collapse. But much as with the freight rates, context becomes all-important. If the current volumes are instead compared with the same months in 2019, the number of containers loaded in Asia in May is 8% higher than pre-pandemic. This equals an annual growth rate of just under 2%, which might be on the slightly lower side of normal, but clearly not a collapse at all.
What we have been seeing in 2023 is best described as a return to normalcy. Seen from a longer perspective, rate and demand developments are back where we came from. It can then, of course, be discussed whether the market should re-adjust to a different kind of normal. That might still happen going forward, but for now the market has not collapsed — it has normalized.
A problem in this context is that cost levels do not appear to have normalized yet. And another problem, for the carriers, is the continued injection of new capacity ordered during the boom market. But over-ordering capacity leading to a temporary down cycle is also not a collapse at all — in fact, this is also quite normal in the industry.
It is, of course, easier to paint market developments to be as extreme as possible — this can boost a negotiation position or create more interesting headlines. But when set into a bit of context, the market is on many levels, though not all, almost boringly normal at present.
