As Overstocking Rationalises Container Rates Set for Subdued Rebound
The supply chain industry is hopeful of a better peak season this year and expects freight demand recovery in the Q2 of 2023, according to the recently published monthly container market forecaster for April by the online logistics platform, Container xChange.
The container price sentiment index (xCPSI), a sentiment analysis tool by Container xChange that concurrently surveys supply chain professionals on their short-term price expectations, continued to show negative readings until mid-March.
But the results consistently turned positive, reaching an all-time high at the beginning of April, when the index started showing confidence building for the coming quarter.
While the industry sentiment is gradually turning positive, there have been many headwinds in the shipping sector in Q1.
Christian Roeloffs, cofounder and CEO, of Container xChange shared: “The global container logistic ecosystem is like a spider’s web. One disruption does not linearly impact the knot. Instead, every disruption reverberates across the web—sometimes in unexpected directions.
"The increase in FED rates, the banking sector crisis, the strikes might seem concentrated in one region, but they have their impact across all trade lanes .”
After North America, the Middle East and ISC region witnessed the second biggest drop in container prices, followed by Southeast Asia. (See data below) .
Industry sources reveal that though the negotiations are due in May, shippers might delay these since the contract rates are still higher than the spot rates.
So, the shippers are holding back to place themselves better during those negotiations. Another expectation is the reduction of contract tenures from one year to smaller time frames.
Commenting on the outlook for the rest of the year, Christian Roeloffs shared further: “Despite avoiding a global financial and economic recession for now, the shipping industry is experiencing a freight recession due to the postponement of inventory replenishment cycles by retailers who overstocked.
"As we look ahead, we anticipate a subdued rebound in demand as retailers begin to deplete their excess stock in the coming months, leading up to the peak season.”
A survey was conducted recently (April 2023) with close to 300 supply chain professionals by Container xChange and asked how they perceived the peak season to develop this year in 2023 as compared to the last year.