Market price

Containers driving used container market price correction

“The current container oversupply situation is the result of a series of reactionary market disruptions that began soon after the pandemic hit in early 2020. With demand increasing, congestion at ports increased and container capacity was blocked for some time. considerably long period of time. This has led to the panic ordering of new boxes at record levels. Over time, as markets reopen and demand declines, excess supply is the natural result of supply and demand forces balancing at new levels. said Christian Roeloffs, co-founder and CEO of Container xChangea technology platform that simplifies the logistics of container movement.

“The oversupply situation is not a surprise as average container prices and rental rates have declined globally since September-October 2021.” added Roeloff.

Short to medium term outlook for freight rates, spot rates and container rates

Freight rates have fallen by around 20% on average since the beginning of 2022 and these will continue to fall gradually, but there will not be a massive drop as the underlying disruptions in the supply chain are still there. Inflation, for its part, has started to strain the US economy and the EU. With inflation and pandemic-induced lockdowns, disruptions will continue to alter the equation between supply, demand and prices. In the longer term, these will gradually disappear and create a new normal balance of supply and demand.

New data released by Drewry indicates a 6 million TUE excess of capacity in the global container fleet. Container xChange’s analysis further indicates that the oversupply will obviously drive the need for more drop space, which is already in short supply. And in a scenario where we assume global supply chain disruptions will fade over time, box productivity will be higher and we will need fewer boxes per unit of freight.

As we see supply chain disruptions easing in the coming months, this will lead to increased box productivity and a structural surplus of containers. If we also see further easing in demand, this will increase the supply of containers available for freight.

There is a strong possibility of a scenario where the equipment ability will not be soaked.

“This situation will lead to tight depot space, carriers will rush to get rid of old equipment, second-hand container prices will continue to gradually decline to a new normal level, and the new market will dry up” .

The situation can be studied from the perspective of the market forces of supply and demand. If container demand declines (resulting from lower consumer demand over the next few months given rising inflation which could contribute to negative consumer sentiment), container supply will naturally increase. Moreover, the price is a function of supply and demand. If demand falls and supply rises, prices will fall. And that’s what’s happening now with container prices.

The shape of the high season

As we have said before, the main factor that has pushed prices up much more than historical levels has been a supply crisis over the past two years due to longer container turnaround times caused by supply chain bottlenecks. This is always true. We still have about 10% of the transportation capacity tied up and taken out of the value chain. Demand, on the other hand, has softened now.

US imports fell 2.4% between March and April. Purchases of goods fell $0.1 billion, as higher imports of industrial supplies and materials (up $1.8 billion) were offset by lower imports of consumer goods (down $1. .5 billion). source: United States Census Bureau

An interesting point is that in the long run, demand for ocean freight is predicted as a multiplier of global GDP growth. And if global GDP does not drop by, say, 5%, global demand for transmission capacity will not drop significantly.

“In summary, we expect a significant increase in pent-up demand in peak season. This will likely keep container prices potentially stable (prevent them from falling further or skyrocketing) in the short term as we get closer to peak season.

“What remains to be seen is how the geopolitical circumstances and pandemic-induced lockdowns (e.g., in China) will unfold in the coming months.”

About Container xChange

Container xChange is a technology company that offers a container trading and leasing platform, payment infrastructure (for seamless and easier payment processing) and efficient operating systems to manage end-to-end container movement across the world for container logistics companies worldwide. Covering the entire container shipping transaction process, starting with finding new partners to track containers and manage payments, xChange makes using third-party equipment as easy as booking a hotel. We’re on a mission to simplify global trade logistics.

As one of the top ten logistics technology companies in the world, xChange is fundamentally transforming thousands of processes involved in moving containers globally. xChange is trusted by over 1000 container logistics companies such as Kuehne+Nagel, Seaco or Sarjak who use xChange every day to improve operational efficiency and improve productivity.