Early peak season proves to be bothersome for container market

27 June 2024

The early peak season is having a major impact on the container market. Importers have already started shipping goods destined to be in the shops as far away as winter. As a result, rates have already risen sharply – much earlier than usual. What does this mean for the upcoming period, when it will only get busier? And how will global congestion affect this period?

Long-term contracts abandoned

Despite previous and careful negotiations, it seems that the long-term contracts agreed between shipping companies and forwarders are no longer very meaningful. Previously agreed deals are firmly swept under the rug. New negotiations, higher contract prices and references to the expensive spot market are the order of the day right now.

We would have preferred not to make the comparison, but the current situation is very similar to the coronavirus era of a few years ago. Then, we also had to contend with peak seasons when sea freight rates rose even more than seemed possible. Will there be a repeat of this ‘black’ period?

Congestion exacerbates market situation

Besides the ongoing disruptions on the Red Sea, global congestion is not making the situation any easier. The total capacity of non-floating containerships adds up to about 2.4 million TEU. For now, the biggest problem lies in Asia, where more than 60% of stationary ships are located.

Singapore takes the lead, but the Chinese ports of Shanghai and Ningbo are also very crowded. This has an impact on Europe, of course. Southern European ports in particular are suffering from high levels of congestion. The situation is not as bad in Northern Europe, but pressure is high there too. For instance, the current strikes in Germany could easily cause extra traffic in Rotterdam.

Outlook after the peak period

However, several logistics platforms, including Hamburg-based Container xChange, predict improvement. It is predicted that the huge increase in rates will slow down in the medium to long term.

What’s more, the current high price level is expected to have an effect on the consumer market. The volume of purchases will reflect high interest rates and falling consumer spending.

Presumably, this also means that the rush to replenish stocks after the peak will diminish. This will have to result in reduced demand, falling freight volumes, and stabilisation or hopefully even a decrease in container rates.

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