• Container traffic growth declined in 2022, with a less optimistic outlook for the current year
  • Ocean carriers adopted super-slow steaming to manage surplus tonnage
  • Second-hand container prices rose in 2021 but are expected to soften in the coming years
  • The cost of moving empty containers, especially to Asia, remains significant

Hamburg, Germany, 18 September 2023: Container xChange, an online container logistics platform held its 5th edition of its Ultimate Container Networking Event, the Digital Container Summit 2023 on 13-14 September 2023 in Hamburg, Germany.

Industry experts like Peter Sand, Xeneta, Antonia Ambrozy, Freightos, John Fossey, Drewry, Nick Saavides, Loadstar, Supal Shah, Arcon Container, Jack Sun, Orange Container Line, Danny den Boer, SeaCube, and Stefan Verberckmoes, Alphaliner/AXSMarine examined container leasing, demand-supply dynamics, market shifts, and strategic insights, providing an unparalleled understanding of the industry’s current landscape and its future trajectory.          

Demand- Supply Dynamics; the shipping outlook

In a deep dive of container shipping demand, experts agreed that the growth in container traffic experienced a notable decline in 2022. Projections for the current year also suggest a less-than-optimistic outlook. While there is optimism for a recovery, the overall rates of growth are anticipated to remain lower compared to previous decades.

The supply side of the equation revealed that the global fleet of container ships is set for expansion in 2023 and beyond. Projections indicate that by the end of 2025, the industry will boast an impressive 30 million Twenty-Foot Equivalent Unit (TEU) slots in service. Vessel slot capacity growth, a crucial factor, witnessed a 4.5% increase in 2022 and is forecasted to expand by 5% in 2023 and further by 6.3% in 2024.

Despite the prevailing slowdown in trade, the interest in ordering new ships has remained unwavering. Over 80% of vessel orders placed in 2023 have been for dual-fuel tonnage, with a substantial number targeting neo-panamax vessels. However, experts cautioned that the historically low rate of scrapping in recent years is set to change, signifying a significant shift in the industry.

Drewry, a leading maritime consultancy, provided a deeper perspective by estimating that the effective container ship capacity was approximately 17% below its potential in 2021 and 15% in 2022. However, significant improvements have already occurred in 2023, with this figure expected to plummet to 7% or possibly even lower. These findings highlight the critical role capacity availability has played in influencing freight rates and carrier profitability over the past two years.

Container equipment market

The container equipment market discussions revealed that the global fleet of containers is on track to experience a slight decline in the current year, and production is expected to hit its lowest point in more than a decade. Drewry anticipates a dip in the pool of container equipment this year, from 50.9 million TEU to 49.9 million TEU, followed by an upward trajectory leading up to 2025, where 53.5 million TEU is anticipated to be in service.

The underlying reason for the unexpectedly low replacement of aging containers in 2021 and the first eight months of 2022 was attributed to supply chain congestion, where these containers were indispensable for maritime trade. However, this overhang is gradually diminishing as supply chains return to a semblance of normalcy.

Lessors’ influence over the pool witnessed a slight dip in 2022, down from just over 51% in 2021 to 49.8%. In 2023, it is projected to further decrease to 48.5%, before rallying to 50.2% by 2025. Notably, ocean carriers have capitalized on their financial strength by ordering more equipment, while logistics companies and Beneficial Cargo Owners (BCOs) have also been investing in containers.

Container production statistics revealed that over 6.6 million TEU of dry freight containers were produced in 2021, which drastically fell to 3.45 million TEU in 2022. 40ft high cube containers dominated the market in 2021, accounting for over 85% of dry freight production. However, this dominance waned in 2022, with 40ft high cubes accounting for less than 65% of the output. Production trends continue to fluctuate, with expectations of an upswing in 2024, largely driven by replacement needs. Furthermore, potential competition from new factories in Vietnam could further shape this landscape.

Container Prices and Lease Rates

Price dynamics in the container industry have undergone significant shifts. Prices have exhibited a downward trend since the summer of 2021. Supply-demand imbalances have played a significant role in these fluctuations, with expectations of a narrowing gap from 2024 as more ships retire.

To adapt to the changing landscape, ocean carriers have implemented super-slow steaming and added additional vessels to loops to absorb surplus tonnage. Newbuild container prices experienced a strong surge until late summer or early autumn 2021, with a 20ft standard dry freight container’s price soaring over 35% within a year.

However, prices softened throughout 2022, with 40ft high cubes even lower than their end-of-2020 prices and 20ft standards stabilizing at the end-of-2020 levels. While prices exhibited a slight uptick in the first half of 2023, demand remained subdued. Reefer container prices remained relatively stable, with expectations of gradual increases driven by strong demand.

The container shipping industry is facing a turning point with both challenges and chances amidst an environment of slowing trade growth where we expect only a tiny 0.3% increase for this year. Furthermore, affecting the demand side, we see major uncertainties related to the global economy as well as with geopolitics. And on the supply side we have significant growth in vessel capacity on the horizon—which will further drive the supply-demand balance out of whack. Ultimately, this will lead to a phase of consolidation and bankruptcies which we have last seen in the period after the GFC—challenging for the entire industry, but also offering chances for bold moves.”, commented Chrisitan Roeloffs, CEO & Co- Founder, Container xChange.

Slower trade growth and reduced supply chain congestion have led to improvements in slot capacity and container availability, creating a situation of considerable oversupply, especially in the vessel segment. Drewry’s estimations suggest that the container pool is set to decline by about 2% in the current year, with total manufacturing output unlikely to exceed 1.9 million TEU—a stark contrast to the 7.2 million TEU and 3.8 million TEU produced in 2021 and 2022, respectively. Newbuild prices, similar to freight rates and spot rates, showed signs of bottoming out, but any price increases in the current year are expected to be modest, given the soft demand landscape.

Second-hand container prices experienced significant fluctuations, with notable increases in 2021. These prices closely tracked newbuild prices, driven by robust demand and limited equipment availability due to maritime trading requirements. Forecasts indicate that prices are likely to soften in the coming years.

“Containers can be booked from Hamburg to Shanghai for $80 per box, from India and the Middle East it’s $5 per container, but that includes the THC [terminal handling charge] which is around $250 a box, so they [the lines] pay [between $170 and $245] to evacuate their equipment to Asia,” explained Supal Shah, the group president of Arcon Containers, during the Digital Container Summit (DCS) 2023 in Hamburg. This highlights the significant cost carriers bear in moving empty containers, emphasizing the need for improved operational efficiencies through better depot communications.

HHLA’s Strategic Stake Acquisition and Expansion Plans

Highlighting an industry-shaping development, the Port of Hamburg witnessed a groundbreaking agreement. Hamburger Hafen und Logistik AG (HHLA), the terminal operator at the port, has entered into an agreement to acquire a substantial 49.9% stake in the operator. Currently, the city of Hamburg holds a 69.25% stake in HHLA. This acquisition is expected to have a domino effect, with Bremerhaven potentially losing out.

Industry experts at the Container xChange conference emphasized that MSC, a key player, might be required to commit further volumes as part of the agreement. MSC has also pledged to enhance its volume throughput at Hamburg, targeting a remarkable 1 million TEU by 2031, alongside relocating its German headquarters to the city. This strategic partnership aims to fortify the entire Port of Hamburg, positioning it as a central hub within MSC’s global network of container services and logistics chains.

Chief analyst at Xeneta, Peter Sand, shared his insights at the conference. He highlighted that MSC’s agreement to buy a 49.9% stake in HHLA will likely impact the container shipping landscape, with potential commitments and benefits for both parties.

Sand stated, “MSC will surely have to commit further volumes as part of the agreement, but the city will benefit from the injection of cash.” He also noted that this move aligns with MSC’s strategy of operating efficiently from port to port.