Liner operators are grappling with a challenging supply/demand imbalance that is impacting freight rates. The year-to-date growth of the fleet has reached 5% compared to 2022 and a substantial 19% compared to 2019. However, container volumes have declined by 2% compared to 2022 and are only marginally up by 1% compared to 2019.
While lower sailing speeds have tempered supply growth compared to 2022, improved congestion has exerted opposing pressure. According to Container Trades Statistics’ Aggregated Price Indices, average freight rates have fallen by 56% year-on-year but remain 19% higher than in 2019. Notably, average freight rates in September 2023 returned to the levels observed in 2019 and likely decreased further since then.
Contrary to rates, key cost components for liner operators have not followed suit. Despite a 29% reduction in the cost of very low-sulphur fuel oil compared to 2022, it remains 5% above 2019 levels. For vessels equipped with scrubbers, heavy fuel oil prices have fallen by 22% compared to 2022 but are still 22% higher than in 2019.
Although the average cost to charter a new ship has declined by 73% year-on-year, it remains 65% higher than in 2019, and in December, it is still 25% above the 2019 average. The actual time charter costs for liner operators are even higher, as they continue to honor contracts concluded in 2021 and 2022 at significantly higher rates.
In contrast, the more lucrative head-haul trades are faring better, with year-to-date volumes and current freight levels standing at 6% and 16% above 2019 levels. Looking ahead, the fleet is anticipated to grow by an additional 9% in 2024, further intensifying market pressures. While freight rate increases may prove challenging, time charter rates are likely to continue their descent.
Source: www.bimco.org