Outlook for contract & spot rates

The financial outlook for container lines in 2024 largely depends on the final weeks of 2023. If they fail to increase spot rates soon, next year's annual contract rates might significantly drop, potentially leading to substantial financial setbacks. Despite attempts to use general rate increases (GRIs) to improve their position, shipping lines haven't succeeded, and the time for a rebound is running out. The decline in spot rates further complicates matters, with all major east-west trade lanes, except Shanghai-Rotterdam, showing decreases.

There's a change of a challenging 2024 if the spot market doesn't improve in Q4. Current contract rates, set to reset soon, are much higher than the falling spot rates. The Drewry’s World Container Index reflects this decline, with all lanes except Shanghai-Rotterdam seeing reductions.

Container lines, still profitable from the COVID-era boom, might endure short-term losses. However, prolonged losses into 2025 or 2026 could be problematic. Analysts suggest that shipping lines need to adjust their capacity, through measures like slow steaming, idling ships, or scrapping, to stabilize the market. The expectation is for a market turnaround in 2024, with a possible alignment of fleet growth and trade growth by October 2025. Yet, these predictions hinge on the shipping lines making the necessary adjustments in the coming year.