Why aren’t ocean container charges dropping sooner?

LONDON – The World Container Index monitoring indicator from transport analytics agency Drewry decreased marginally by 0.2% to $7,635 per 40-foot container this week. Final week, the index fell simply 0.1%. The week earlier than that? 0.9%.

However with demand seemingly on the decline throughout many industries, shouldn’t charges be dropping sooner? It’s extra difficult than that, says Drewry.

“Our proof is that the insurance policies adopted by the service {industry} in responding to demand shocks are extra vital than the relative rise or fall in demand,” Drewry wrote in a briefing this week. “Container community inefficiencies and widespread port congestion and inland bottlenecks are additionally large components supporting freight charges. The differential between contract charges and spot charges and the interplay between these two markets are different main drivers of charges.

“As quickly because the Shanghai lockdown began in mid-March, sailings had been cancelled by all alliances, and clean sailings will proceed within the forthcoming weeks,” it continued. “The outcome? Regardless of the sudden slowdown in demand and the massive financial disruptions, the service {industry} diminished capability in each the Asia-North Europe and Asia-West Coast North America trades in April and Might.

“Understanding how carriers handle capability – sooner and extra tightly than earlier than 2016 – is a crucial a part of understanding the development and the decrease volatility of freight charges post-pandemic.

“When volumes rebound after the Chinese language lockdowns, you can properly see a rise in port congestion. Port congestion will act, like clean sailings, as a break on surplus capability so carriers have two buffers towards over-capacity.”

So what can we count on for the remainder of the yr?

Answering that query is difficult, says Drewry, as charges have gotten tougher to foretell.

“Simply because the supply-demand isn’t the principle driver of freight charges within the present market cycle, there might be new components driving freight charges within the medium time period: decarbonization rules, ‘carbon pricing’ (anticipated to start out in Europe) and the continued consolidation and focus of the service {industry}.”