Spot rates look set to drop below pre-pandemic levels

Container spot rates on the Asia-Europe and transpacific tradelanes are on course to dip below pre-pandemic levels before the end of the year.

However, ocean carriers’ operating costs are significantly higher than they were in 2019, which could force more exposed lines back into the red in the first quarter of 2023.

According to Lars Jensen, CEO of Vespucci Maritime, given the extremely weak demand, the sharp decline in spot rates was “inevitable”.

But he added that after rates had bottomed out, there could be a bounce-back in demand, which would support a freight rate recovery.

Both Maersk and ONE reported material weakness in their liftings at third-quarter earnings calls this week, with Maersk down 7.6% and ONE down 9% in the period, compared with the previous year.

Meanwhile, the spot market indices are unable to keep pace with heavy discounting on exports from China. For example, Drewry’s WCI North Europe component declined by a relatively modest 4% this week, to $3,684 per 40ft, after falling by over a third since September.