According to reputable consulting groups monitoring ocean shipping, reduced demand attributed to the World economic situation has led to a collapse in volume of ocean freight from Asia to Europe and North America as reflected in lower rates.
Extreme competition has now replaced the adoption of consortia and alliances that shared capacity to optimize return. Shippers are negotiating rates covering contracts of short-duration now measured in months compared to previous annual agreements. The cost of sending a container from China to Los Angeles dropped to $1,238 in late February compared to $15,600 in February 2022.
The ocean freight industry is characterized by cycles of boom and bust associated with the lag time between orders for new vessels and their delivery. Approximately130 new container vessels are on order to be added to the fleet over the coming 40 months. It is evident that older and inefficient vessels will be scrapped, a trend that is driven by the need to conform to new environmental standards. This trend may well be accelerated by a period of low rates attributed to decreased demand for production of goods in China and trends to onshoring in North America.
The National Retail Federation estimates that ocean freight volumes fell by 12 percent in February compared to the previous month and will be 26 percent down from the comparable month in 2021. Scheduled capacity from Asia to the U.S. is down by 30 percent and from Asia to Europe by 20 percent. At this time seven percent of global vessel capacity is idled and 60 charted vessels will be returned to their owners by the larger operators including MSC that operates 700 vessels.