Container Lines Face Gloomy Outlook
Container carriers are struggling with vast overcapacity, putting them on course for potentially disastrous losses in 2024 and beyond.
The Xeneta Shipping Index has plunged 62.3% as contracted rates collapse. Though some older, higher-rate contracts have provided temporary relief, 4 top carriers still posted losses in Q3 2022.
This protection vanishes as contracts expire in early 2024. Shippers now only want short 3-6 month contracts at far lower rates.
With the shipping index sliding further and new contracts certain to be much cheaper, losses could be massive in 2024. Capacity cuts are urgently needed but could prove difficult to enact.
Experts predict oversupply plaguing the sector could persist until at least 2028. The next decade may echo the pain seen pre-pandemic when rates hit rock bottom.
In 2016, it cost just $99 to ship a container from Shanghai to Brazil. Without significant capacity management, similar race-to-the-bottom rates could return, bringing financial havoc.
Facing perfect storm of oversupply, sliding contract rates and unwillingness by shippers to sign long-term deals, container lines stare down the barrel of catastrophic losses. Their navigation skills will be severely tested in the tempestuous years ahead.
