Carriers Seek Normalization Reducing Blank Sailings While Rates Fall

The container shipping segment of the industry continues to struggle back from its peaks of 2020 and 2021 and the sudden collapse in volumes and rates that started in mid-2022. Industry executives and analysts have forecasted that the markets would begin to normalize and some indicators are beginning to show that the market may have begun to rebound while others such as long-term ocean freight rates continue down having fallen nearly 50 percent in the second quarter of 2023.

“A normal container shipping market is not the same as a container shipping market with no changes or disruptions,” comments Alan Murphy, CEO of analytics firm Sea-Intelligence. “There will always be operational disruptions, a portion of which will be in the form of blank sailings.”

Sea-Intelligence notes in its recent analysis that carriers have reduced the number of blank sailings from their scheduled, a technique used to control capacity.  Their data shows that blank sailings are at a post-pandemic low, going under 10 percent in June versus a peak of one in four at the beginning of 2023.

Xeneta, however, in analyzing the current rate environment still sees the container market as “beleaguered.” The latest data from Xeneta’s Shipping Index shows a further decline of 9.4 percent in global long-term shipping rates for June. This follows a 27.5 percent collapse in May and a 10.3 percent fall in April. Xeneta calculates that contracted freight rates are down 47.2 percent for the second quarter of 2023 and 51.7 percent since the start of 2023.

“The fall from the peaks of last year have almost been as dramatic as the rates explosion which gave carriers such a profitable 2022,” comments Patrik Berglund CEO of Xeneta. “With ongoing weak demand, continuing macroeconomic and geopolitical uncertainty, and a growing excess of capacity, it’s difficult to see how the industry can turn this current trend around – at least in the short-term.”

The Far East export benchmark, a key link in the global supply chain, has, Berglund remarks, steeply declined since December 2022, shedding 65.3 percent of its value. Meanwhile, the U.S. import sub-index is down 56.3 percent for the year, with the European import benchmark declining 46.2 percent. The opposing European export figure fared only slightly better, down 38.3 percent.

“One is left wondering where this will all end,” Berglund concludes. “If we look at volumes, there are some figures that suggest things might not be as bad as they first appear – with U.S. container exports actually increasing for the first four months of the year, by 1.8 percent year-on-year, while inbound container demand for Europe ‘only’ declined by 1.1 percent for the same period. But again, those figures have to be seen against a wider backdrop of declining global demand, easing port congestion, and increased capacity – all factors that exert downward pressure on rates.”

Sea-Intelligence points to good news for the shippers. They note that in addition to the lower rates, the number of blank sailings is now at the lowest since the pandemic started. Murphy notes it is not perfect – the level is not zero – but that zero blank sailings is not a normal state of affairs for the industry. The reduction however means more capacity for shippers.

“We also see a slight uptick again, as we approach early July – likely a reflection of the carriers wanting to bring the spot rate decline under control,” comments Murphy. With demand leveling off, Sea-Intelligence believes that carriers are starting to respond to the rate declines experienced so far in 2023 by adjusting their capacity to respond to those steep declines. If the pace of rate declines continues to decelerate, container shipping may have achieved the predicted normalization after a tumultuous year.