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Freight Rates Finally Set to Stabilise

2023 could be the year when freight rates begin to stabilise. KMI predicts that container freight rates will no longer be determined by actual cargo demand, but by how liner operators control shipping supply. Capacity control by the larger carriers should prevent rates from falling further.

shipping freight
Shipping lines are expected to stabilise freight levels rather than raising market share

Ko Byung-woo, the shipping research director at Korea Maritime Institute (KMI), believes that shipping lines have decided that stabilising freight levels, rather than raising market share, will boost profits.

“The fight for market share hurt the container shipping market,” he explained, “but today, following consolidation, the liner industry is more oligopolistic, where a few companies exert significant control over a market, enabling their joint actions to control the supply of ships. We are, therefore, sceptical about a nosedive in freight rates.”

“The fight for market share hurt the container shipping market”

Mr Ko predicted an annual increase in global container traffic of 3% up until 2030. His predicted increase is less than the 3.6% growth seen in the previous year, which suggests a longer-term reduction in shipping demand.

The latest report from Sea-Intelligence backs up this prediction. The report revealed that liner operators had reduced capacity by 18% in the run-up to the Chinese New Year holiday.

The combined effect of Russia’s invasion of Ukraine and rising inflation means we can only expect global container traffic to grow by 2% in 2023. Volumes on Pacific and Asia-Europe routes are expected to decline by 0.3% and 2%. However, intra-Asia routes have a positive estimated growth of 4.4%.

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