As 2023 draws to a close, shipping liner companies are looking back on the year as a troubled time, since declining demand for ocean freight combined with increasing capacity to drive maritime container shipping rates down far below their pandemic peaks, according to a report from Xeneta.
Even as they digest that impact, ocean freight firms must continue planning for the future, the Oslo-based firm said in its “2024 Ocean Freight Shipping Outlook.” Business trends in 2024 will be driven by six key issues, the report says: Demand will grow by 2.5%, supply will grow by 6.5%, spot rates will remain volatile throughout the year, carriers will aim to increase spot rates through smart capacity management and General Rate Increases (GRI), long-term rates will be steadier than seen during 2023, and spot rates will hover just below or above long-term rates throughout 2024.
While those predictions play out, rates could have another volatile year, Xeneta CEO Patrik Berglund said in the report. “What we can say is that the current rates are unsustainable. So the question is when they will go up, not if they will go up. From what we know, there’s little room to go further down. What’s most likely is they stay a little longer around this level, maybe go a little bit down, but they will, for sure, go back up.”
But carriers will also have to monitor many other variables, including new environmental regulations being introduced in 2024 that could complicate an already challenging market. “These regulations will prohibit some carriers from utilizing all of their capacity because their vessels are not environmentally-friendly enough and will go out of the market. As a result, we will continue to see slow-steaming and blank sailing,” Berglund said.
While carriers can start planning that strategy right now, other potential changes on the horizon for 2024 will be less predictable. “Think about underlying weak macro-economics; inflation rates, cost of living, interest rates and reduced global consumption. On top of that you have wider political turmoil and wars,” he said. “There are still some heavy dark skies on the horizon and that could change the equation. But I still believe shipping lines will adjust to whatever demand is out there because anything else does not make sense.”