Extra capacity from new ships may drive ocean rates lower in 2024

Asia to U.S. West and East Coast container spot freight rates favor shippers
Asia to U.S. West and East Coast container spot freight rates favor shippers. Photo Credit: Xeneta

December 19, 2023–Increased capacity and reduced demand mean that shippers are in a potentially comfortable position when it comes to negotiating new contract rates with ocean carriers in the coming year, according to a leading rates analyst.

“The cards seem to have been dealt into the hands of the shippers, at least the good cards,” commented Peter Sand, Chief Analyst for Xeneta, considered one of the world’s leading ocean and airfreight rate benchmarking and market analytics platforms in the shipping and logistics industry.

 “What we see developing in the market is a continued pressure from a higher inflow of new ships,” he says, which is laying the groundwork for lower ocean rates, especially as shipper demand falls.

“From a fundamental angle, you should expect still more ships to come into global services and into the global market. We also inform people that we see demand not keeping up.”

He does not see a rate war on the horizon among the ocean carriers like the one that took place in late 2022. While “we will not see an outright rate war coming back in 2024, we would definitely still see a pressure on rates downwards.”

Of course, there’s always a limit to how far ocean carriers will go. Sands explains how ocean carriers have “successfully” managed capacity on the trans-Pacific route this year. “They have pushed up General Rate Increases, lifting the spot rates and lifting the long-term market, also.”

“So,” he says, “the waiting game is not an eternal one. You also need to know when to strike, and I think there’s more upside risk left in the sense that you could actually end up having a bad deal if you wait out too long.”