The global container shipping market, having experienced an unprecedented boom, now confronts historic challenges. Like meteorologists grappling with elusive climate patterns, shipping companies such as ONE admit that predicting 2023 trends is fraught with uncertainty. Three looming shadows—plummeting spot rates, pressured long-term contract prices, and a flood of new vessel capacity—have left carriers treading cautiously.
Spot Rates Collapse: The End of a Golden Era
The days of soaring demand and scarce containers are now a distant memory. Data reveals that the Shanghai Containerized Freight Index (SCFI) has plunged 78% since its January peak. Routes from Shanghai to Northern Europe saw an 86% drop, while rates to the U.S. West Coast fell 82%, settling at $1,423 per forty-foot equivalent unit (FEU)—below pre-pandemic 2010–2019 averages.
For carriers like ONE, this is a dire signal. Inflation continues to drive operational costs higher, even as revenues shrink. ONE has slashed its profit forecast for the latter half of its fiscal year, anticipating operating profits to halve compared to earlier periods. "Inflationary pressures will persist," the company noted, though the pace of decline beyond Q4 remains uncertain.
Long-Term Contracts Under Pressure: Renegotiations Loom
The spot rate collapse is destabilizing long-term contracts, with shippers pushing for lower rates. ONE confirmed it would address renewal terms as contracts expire, but analysts expect 2023 negotiations to begin at depressed levels. Kepler Cheuvreux’s Anders R. Karlsen warned of a "return to normalized earnings," while Alphaliner projected carrier income declines of 30%–70%.
Xeneta’s CEO observed carriers are now "fighting for volumes" amid dwindling consumer demand. DNB Markets’ Jørgen Lian predicted 2023 would test the floor of container rates. James Hookham of the Global Shippers’ Council added, "The critical question is how much cargo shippers will commit to renegotiated contracts versus the spot market, where rates may soon dip below pre-COVID levels."
New Capacity Influx: A Glut on the Horizon
Compounding the crisis, a wave of new vessels—ordered during the boom—will enter service just as port congestion eases. Clarksons reports a record 7.4 million TEU of new orders in December alone. ONE, with 30 new ships (27.4% of its fleet), acknowledged deliveries through 2025 will intensify competition. Environmental regulations and scrapping of older vessels add unpredictability, but the supply surge is undeniable.
"This will push rates to levels that expose high-cost carriers," Lian cautioned. "The era of windfall profits could swiftly reverse to losses."
Navigating Uncertainty: Risks and Pathways
Additional variables—the Ukraine war, lingering pandemic policies, and U.S. West Coast labor talks—further cloud the outlook. Yet opportunities exist: economic recovery may revive demand, while route optimization and operational efficiency could bolster competitiveness.
For container shipping, 2023 will be a year of reckoning. Carriers must adapt swiftly to survive the storm—and perhaps emerge leaner for the next cycle.