Ocean freight rates 1st and 2nd quarters 2023
27 March 2023
It’s March 2023 and the first quarter has come to an end. Another remarkable period in which sharply falling ocean freight rates have prevailed. Indeed, rates have never shrunk faster in such a short space of time as in January 2023. Will this unexpected turn of events continue, and if so, how will shipping companies respond? But, more importantly, what does this mean for you as a forwarder?
Shipping companies on their knees after the first quarter
Now that January, February and March are behind us, the first shipping companies are presenting their quarterly figures. The spectacular financial results of the past two years seem to have come to an abrupt end. Back in November last year, the Norwegian Ocean Freight Platform Xeneta reported a rate back at its pre-coronavirus level for the first time. At the time, this involved scheduled service from northern Europe to Asia. Meanwhile, the reversal in rates worldwide is a reality.
It’s fair to say that shipping companies’ earnings for the first quarter of 2023 have been subjected to a harsh reality check. The millions of euros in profits pocketed over the past two years seem to be a thing of the past. But while they hope that current rates and spot prices have bottomed out, another development is already taking place in an unexpected quarter.
Plenty of shipping space
UK research firm Transport Intelligence recently released a new report. The result suggests that demand for space and cargo will continue to decline in the next quarter. It seems that previously ordered new ships, expected in the second half of 2023 and the first quarter of 2024, will be redundant for the time being. Whereas in the past these ships were intended to provide additional, necessary capacity, they now seem to be becoming a liability for shipping companies.
In addition, an unexpected development in the charter market is creating additional headaches for shipping companies. An increase in daily charter rates is again making it worthwhile for owners of container vessels, so-called charters, to keep these ‘old-timers’ going. So whereas they were initially considering scrapping their old ships, they are now happy to grab a piece of the pie and find themselves in shipowners’ waters.
Forwarders can take a breather
Excess capacity, extra available charters; how does all this affect forwarders’ activity? Contract rates have never fallen as hard as they have in recent months. If volumes remain stuck at this level over the forthcoming period, it seems inevitable that rates will gradually further decline in the months ahead. Good news for you as a forwarder.
In addition, forwarders are counting on an increase in consumer demand. Warehouses and distribution centres are currently filled to the brim with stock. In contrast, items on order and new bookings can currently be transported from A to B for very reasonable transport rates. HopHH efully, the downward revised profit forecasts for this year can still be achieved.
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