The first week of the Chinese New Year has ended, but analysts' forecasts are not unfolding as quickly as hoped.
Drewry's World Container Index dropped by just 1% over the past week, and overall, since late January, rates have been decreasing steadily (very, very steadily).
How are major ocean carriers performing amidst the crisis? European shipping lines finished Q4 2023 with losses, but during the first months of 2024, they may well make up for lost ground. Any surcharges currently applied to both short-term and long-term rates completely change the dynamics. These can be war risk surcharges, peak season surcharges, or extra capacity fees, and they have a greater impact than merely growing cargo volumes.
Here is an example from Maersk's report: Transporting an extra 100,000 40-foot containers yields an increase in annual profit of only $0.1 billion. If the container count remains the same while the freight rate increases by $100 per 40-foot container, the impact on annual profit reaches $1.2 billion.
Despite profits generated by rate hikes, shipping companies are forced to redeploy these funds into deploying additional capacity. Furthermore, once passage through the Suez Canal is deemed safe again, a new challenge will emerge that is already being anticipated: cost inflation.
What's next? Judging by the rate of decline, and if the Red Sea conflict persists throughout the entire year, we anticipate that by late 2024, prices will gradually decline to a middle ground between mid-2023 and early 2024 levels.