Ocean Freight Rates for Q2, 2023 end on a multi-year low

On what had been a relatively stronger quarter for ocean freight over the past five quarters, the month of June erased much of the support as prices edged towards multi-year lows. The Breakbulk spot rates had depreciated about 3 to 5% for the quarter, courtesy- The Toepfer’s Multipurpose Index (TMI) and the Drewry Multipurpose Time Charter Index. The shortsea rates reported as of May 2023 too witnessed their largest monthly fall in recent times in May 2023, losing about 4-6%. While, in case of container rates, the prices are now at levels last seen in 2019 and 2020. The Freightos Global Index (FBX) ended downwards by 2% to end at USD 1,277 as of 30th June, 2023- the lowest ever levels see in 44 months. The Drewry’s World Container Index dipped below USD 1,500 to end at USD 1,494- a 38 month low. The Shanghai Containerized Freight Index, despite appreciating 3% based on the latest weekly quote has still been trending lower, whereas its long-term counterpart- The Chinese Containerized Freight Index has broken below the key support level of USD 900 to end at USD 895. The latest charter rates for May 2023 as indicated by Xeneta too took a 27% monthly tumbling and is now indicating significantly lower rates.

The fall has been nearly impartial across all trade lanes. Despite the US West Coast conundrum over the 1st 2 weeks of June, the transpacific rates took a tumbling across the board losing about 12-13% from the high rates witnessed mid-quarter, as indicated across the various agencies- Drewry, Freightos and Xeneta. The rates to South America, as reported by Freightos too have seen deceleration over the past three weeks, often showcasing double digit weekly dips. The transatlantic rates from Europe- USA which had outperformed its peers in 2022, recorded one of the highest weekly dips of 17% this week as reported by Drewry. The rates which are currently at USD 2,670 have erased about two-thirds of its value from New year 2023. As for the China-Europe and the China- Mediterranean rates, they have already breached the pre-pandemic levels on the downside.

The industry is now at a double whammy- no demand pick-up seen across geographies and the high supply of new fleet hitting the water. Service cancellations are at an all-time low in the post-pandemic period, while service reliability is indicating a score of 66.7% which indicates normalcy. With the peak season off, and the holiday seasons further away by three months, Q3 2023 remains a suspense in terms of where the rates would be headed.
Source: By Gautham Krishnan (Gautham Krishnan is a logistics professional with Fluor Corporation, in the area of project logistics and analytics, and has worked in the areas of Project Management, Business Development and Government Consulting)