Despite the geopolitical volatility, the global economy — and by extension the global container trade — has remained remarkably resilient. That said, none of us expected the COVID-driven consumer demand cycle to be reflective of a future steady state. Since mid-2022, a more difficult market environment has arrived, and the container shipping market is expected to remain volatile with increasing pressure on profitability. Economic uncertainty, waning consumer demand and a record level of new vessel orders make for supply-demand disequilibrium that will drive downward pressure on rates. Rapidly rising costs, exacerbated by the International Maritime Organization’s decarbonization and sustainability regulations, will put further pressure on the bottom lines of service providers and equipment lessors.
Ocean carriers, and by extension leasing companies and shippers who depend on the global network, will be looking at a 2024 with extremely challenging and highly competitive conditions. Market forces will be difficult, industry profitability will be under pressure from lower rates and rising operating costs. Port efficiency and network fluidity will work fine, for now, until the volumes return. Remember, we never addressed the tough issues, we only hit the wave tops. The cost of environmental compliance will be enormous. To no one’s surprise, shippers and shippers’ associations may object to paying for sustainable solutions, the same shippers and shippers’ associations that think free time is actually free. Free time is not free, the containers and chassis are not free, the land this equipment sits on is not free. Shipping lines and leasing companies have invested billions of dollars in equipment and that capital expense is significant and getting more expensive given rising interest rates. The cost of using equipment beyond the allowed time period is material and so is the opportunity cost of not having that equipment available for the next revenue generating move.
2024 will be full of challenges, but none of us are strangers to tough environments. How we cooperate, or not, will be the defining difference in how all stakeholders move forward.
Bob Sappio, CEO, SeaCube Containers