The Freightos Baltic Index (FBX) was up 6% WOW on 1 January, marking the largest relative gain since August 2021, and still remains 63% above the average level in 2019. Within the index, China outbound rates into US are now broadly back to 2019 levels, while westbound rates into Europe are still nearly 2x the 2019 level and remain strong. Also, European export rates into the Americas remain elevated, with Europe-USEC box rates of USD5,700/FEU is still 3x the 2019 average of USD1,900/FEU.

The SCFI was marginally up WOW for the first time since July to 1,108 on 30 December, but is down 78% YOY which was the peak level during the container boom. Having corrected sharply this autumn (c5% weekly decline on average between September and November), the Shanghai spot index remains 37% above the 2019 levels.

The slight positive bounce in box rates into January comes at a time when liners have traditionally pushed for rate increases. Such increases have historically been more or less efficient longer term depending on the underlying tightness in the market. While a positive shift could be conceived as data point for the market bottoming out, the proof of stagging the rate decline will be in the period ahead. Liners have been blanking sailings in anticipation of lower volumes during the Lunar New Year holidays in China 21-27 January, and some front-end loading of volumes in January tends to provide some relief for the Liners. At the same time, widespread outbreaks of Covid-19 have again affected port efficiency in Asia where we find congestion levels again at record levels (195 vessels of +3k TEU versus the all-time high 196 in August 2021).

In sum, we still believe the container market should continue to struggle in coming months as lackluster demand meets considerable deliveries in 2023 (10% of the fleet for the year, while 3% of the fleet in Q1) and more potential for reversed inefficiencies (8-10% of the fleet is still held up in extraordinary congestion). While Xeneta’s quoted contract rates remained firm for December, the situation only reflects very limited contract negotiations as shippers hold out in expectation of worsening freight markets. As a result, we would expect the liners to adapt to the reality and see a softer approach to its client’s contract commitments to secure sufficient volumes after the immediate supply response of blanked sailings and rerouting has been exhausted.