The first half of 2024 in the container shipping market was marked by an early peak in demand, tight capacity, and rapidly rising freight rates due to several key factors.
These factors include supply disruptions from prolonged rerouting around the Red Sea, increased exports driven by restocking needs in Europe and the U.S., and shippers advancing shipments in anticipation of rising international trade risks.
Transportation Demand
Global container shipping demand remained robust in the first half of the year. Data from Xeneta and Container Trade Statistics reveal that in May 2024, global sea container volumes reached a record high of 15.94 million TEUs (twenty-foot equivalent units), surpassing the previous peak of 15.72 million TEUs set in May 2021.
From January to May 2024, cumulative freight volume amounted to approximately 74 million TEUs, representing a year-on-year increase of 7.5% compared to the same period in 2023.
As one of the world’s largest exporting nations, China’s total import and export value from January to May 2024 reached $2.46 trillion, up 2.8% year-on-year. Exports grew by 2.7% to $1.4 trillion, while imports increased by 2.9%, totaling $1.06 trillion.
Among major export goods, while exports of clothing and accessories saw a slight decrease, there were significant gains in exports of furniture, automobiles (including chassis), auto parts, and plastic products. Notably, automobile exports (including chassis) reached $46.43 billion, driven by the accelerated export of new energy vehicles. This marks a 19.9% year-on-year increase, a sevenfold leap compared to the same period in 2019.
New Restocking Cycle Overseas
After a year and a half of inventory reductions, restocking demand has surged in Europe, and the data from the U.S. Census Bureau on the seasonally adjusted inventory-to-sales ratio shows that while the overall retail inventory-to-sales ratio in the U.S. remains low compared to pre-pandemic levels in 2019, it has exhibited positive growth each month compared to the same period in 2023.
By May 2024, the effects of restocking that began earlier in the year had become apparent, with the inventory-to-sales ratio in some categories returning to pre-pandemic levels. Although the ratio for automobiles and parts has grown significantly compared to the same period in 2023, it remains well below 2019 levels.
However, categories such as furniture, electronics and appliances, building materials, and gardening supplies have recovered to exceed 2019 levels. Meanwhile, the inventory-to-sales ratios for food and beverages, clothing, groceries, and department stores remain slightly below 2019 levels.
Freight Rates Exceed Expectations
In the first quarter of 2024, freight rates underwent a seasonal adjustment following the pre-Chinese New Year shipping peak. However, they remained significantly higher than during the same period in previous years.
By the second quarter, constrained capacity led shipping companies to raise freight rates at a pace exceeding that of the 2021 pandemic, resulting in an early peak in the container shipping market. According to the Ningbo Containerized Freight Index (NCFI), the average composite index for the first half of 2024 stood at 1,745.8 points, reflecting a 140.2% increase quarter-on-quarter and a 152.9% increase year-on-year.
By the end of June 2024, the NCFI composite index had surged to 2,905.4 points, marking a record high (excluding the pandemic period of 2021-2022) with a year-on-year increase of 331.2%.
Freight Rates by Route
Europe Route: Freight rates saw a substantial rise due to multiple rounds of hikes by shipping companies. By the end of June, the rate reached $8,773 per FEU (Forty-foot Equivalent Unit), a year-on-year increase of 677.7%.
North America Route:Â Starting in late April, freight rates increased significantly every two weeks. By the end of June, the average market rate for the U.S. East Coast was $10,258 per FEU, a year-on-year increase of 342.5%, once again surpassing $10,000 per FEU. The U.S. West Coast route had an average rate of $8,105 per FEU, also up 342.5% year-on-year.
South America Route: Strong transportation demand persisted from late March, driving freight rates to rise for 16 consecutive weeks. By the end of June, the average market rate for the South America East Coast route was $9,729 per FEU, a 230% increase year-on-year. The South America West Coast route reached $7,518 per FEU, up 201.1% year-on-year.
Africa Route: In response to shippers’ needs and the pursuit of higher profits, some capacity from African routes was redirected to South American routes. This shift contributed to a general increase in freight rates on African routes. The South Africa route had an average market rate of $9,008 per FEU, up 494.2% year-on-year, while the West Africa route reached $7,622 per FEU, up 224.5% year-on-year.
Outlook for the Container Shipping Market in the Second Half of 2024
According to July data from the International Monetary Fund (IMF), global economic growth is projected to be 3.2% in 2024, consistent with the April forecast. The World Trade Organization (WTO) expects global merchandise trade growth of 2.6% in 2024, a significant recovery compared to the 1.2% decline in 2023.
In major consumer markets, economic growth and slowing inflation have influenced the European Central Bank to cut interest rates. On June 6, the ECB announced a 25 basis point reduction in the three key eurozone interest rates. This decrease in manufacturing loan costs across Europe, along with eased financing pressures, is expected to help companies maintain or even expand production and investment capacity, thereby positively impacting demand growth.
Additionally, consumer demand exhibits signs of improvement as inflation pressures subsist. The U.S. National Retail Federation (NRF) has raised its monthly import volume forecast, predicting that from January to November, the U.S. will import 22.58 million TEUs, a year-on-year increase of 10.8%.
Import container volumes are expected to continue rising, peaking annually at 2.22 million TEUs in August, a year-on-year increase of 13.3%. The NRF also forecasts that core merchandise retail sales in 2024 will grow by 2.5% to 3.5% compared to 2023. These factors point to a continued strengthening of U.S. import demand, which will benefit the North American route within the container shipping market.
Although the second quarter experienced early shipments of some goods and rapid freight rate increases, creating an earlier-than-usual peak season, and despite current high freight rates on European and American routes, positive economic conditions in these regions may sustain transportation demand through the second half of the year. While freight rates may see some volatility and a potential decline, they are expected to remain significantly higher than last year’s levels, even after a decrease.