By Eric Huang.    Photo：飞 谢 

In the past two years, due to the incredible shipping demand and sky-high freight rates, all shipping lines have tried their best to find containers to ship the goods. Whether it is new containers, old containers or even rotten containers that should have been replaced, they can be seen everywhere. In the United States, there was a period of time when empty containers had to be piled up on the roadside due to severe congestion at the terminals. With the rapid reduction of shipping enthusiasm in the post-epidemic era, although the global shipping order is gradually returning to normal, those empty containers "created" in the past period have become another headache for shipping lines. Accompanied by the freight rate issue that has fallen into an incomparable abyss, let the shipping lines fall into a dilemma next year.

The pace of global shipping activity will also lose momentum next year as economic turmoil, conflict in Ukraine and fallout from the pandemic dampen prospects for international trade, according to a statement last week from the United Nations Conference on Trade and Development (UNCTAD). The world's largest investment bank expects global growth to slow further in 2023, a year after Russia invaded Ukraine and soared inflation. In its Review of Maritime Transport 2022, the UNCTAD expects global seaborne trade growth to slow to 1.4% this year and remain at that level in 2023. This compares to a 3.2% increase in 2021, with total shipments of 11 billion tons, and a 3.8% decline in 2020.

For the entire period from 2023 to 2027, the projected average annual growth rate of 2.1 percent is lower than the average growth rate of 3.3 percent in the previous three decades, UNCTAD said, adding that the recovery of the shipping and logistics industries is now at risks such as the war in Ukraine, the continued spread of the epidemic, lingering supply chain restrictions, the cooling of the Chinese economy and the zero-COVID policy, accompanied by the pressure of severe global inflation and rising living costs. A surge in global consumer spending in 2021 has pushed the container shipping market to record levels, partly because of the lockdown. The impasse in global logistics will disappear as demand and supply forces are rebalanced, but the risk of strikes in major ports and inland transport has increased considerably.

The impact is rippling through domestic U.S. supply chains, leading to a drop in freight volumes for trucking companies and railroads. It also lowered the high freight rates that have crushed importers' shipping budgets for the past two years, offering retailers and manufacturers looking to ship goods by an opportunity to cut logistics costs. Still, the drop in shipping costs has yet to have a profound impact on the economy, in part because even after this year's sharp decline, rates remain in many cases above pre-pandemic levels. The eye-popping drop also reflects spot market prices. Most container transportation moves at contracted rates, and these long-term prices have not fallen nearly as fast as the spot market. However, the gap between spot market rates and contract rates is narrowing, and low spot freight rates will have a major impact on new annual contracts that shipping lines will negotiate with customers in early 2023.

At the same time, in the next few years, the world's major trade lanes will face an influx of new shipping capacity of about 2.4 million standard 20-foot containers, which is the highest nominal capacity in history, much higher than the previous high point about 1.5 million standard 20-foot containers. A key difference from the past is that major shipping lines now have a lot of cash on hand, and it has been pointed out that major shipping lines’ revenues in the first six months of 2022 are the same as they were in the 10 years before the pandemic. Experts in the industry predict that the chances of the shipping lines fighting a freight rate war next year will be as high as 80%, because these major shipping lines have sufficient fighting funds for fighting a protracted war and would get the victory consequently.

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