Container price bubble expected to burst in H22024

Average container prices for 40 ft high cube cargo-worthy containers across key ports in China rose by 45 percent month-on-month from $2,240 in April to $3,250 in May 2024.

"These were around $1,698 in November 2023 and around $7,178 in September 2021 (at the height of the Covid boom)," says the latest update from Container xChange.

Container prices have remained relatively stable in the U.S. and Europe, according to the latest container market forecaster from the Container xChange.

Key findings also include insights into port congestion and carrier network changes on market dynamics, the cautious restocking behaviour of U.S. retailers and the year-to-date growth in inbound TEUs at major U.S. ports.

Capacity shortage, unexpected demand drive price surge
The surge in container prices is driven by a significant lack of capacity (containers and vessels) that coincides with an unexpected increase in demand for capacity, the update added.

"Capacity is low because of Red Sea diversions stretching carriers’ networks thin — essentially carriers wanting to maintain weekly sailings have to deploy additional vessels on their Asia-Europe loops. This decreases the margin for error—making the management of unexpected disruptions very challenging.

"The diversions and the subsequent rebalancing of carrier networks have led to downstream disruptions like port congestion as short-term changes in carrier networks and vessel bunching have led to some ports facing spikes in throughput.

"We have seen an unexpected increase in demand for capacity — as shippers are pulling shipments forward in order to avoid the uncertainty of future disruptions in the rest of 2024."

Christian Roeloffs, Co-Founder and CEO, Container xChange says: "Shippers are pulling shipment dates forward, resulting in a temporary demand for shipping capacity. This is reflected in higher throughput volumes despite underlying consumer demand and factory orders being weak."

The year-to-date container TEUs comparison from 2024 to 2023 shows an average 18 percent increase in inbound TEUs at the major U.S. ports, the update added.

"As we monitor the market closely, it’s evident that the current spike in container prices is not sustainable in the long term as it is not backed by strong underlying demand. Concerns over labour markets and high interest rates imply that consumers are likely to reduce spending, which could lead to a decline in demand for goods, and, consequently, a reduction in shipping volumes in the near term unless the demand revival becomes stronger and the supply capacity soak up intensifies."

Market outlook
"Given these factors, we expect that the elevated container prices we've seen in recent months may not be sustainable," says Roeloffs. "As the initial rush to restock inventories subsides and the real demand from consumers and businesses remains flat, we anticipate a stabilisation or even a decline in container prices in the mid-term. The market is showing signs of volatility driven by short-term factors, rather than a sustained increase in demand.”

The subdued consumer sentiment reflects ongoing concerns about labour markets and inflation, which are likely to dampen consumer demand further, the update added.

Ocean spot freight rates set to rally
Since the end of April, Asia–N. America West Coast spot rates, for example, have spiked more than 70 percent, passing the $5,000/FEU mark and their previous 2024 high hit in February when prices first soared on the start of Red Sea diversions.

With capacity and equipment scarce and spot rates now several thousand dollars above long-term contract levels, annual agreements are once again becoming unreliable. "A recent Freightos Group survey of more than fifty logistics professionals found that since early May, nearly 70 percent of BCOs and forwarders with long-term ocean contracts have had containers rolled or pushed to the spot market or are facing contract renegotiations with carriers to increase their long-term rate levels."