For the past few months, we’ve been warning that U.S. containerized import volumes weren’t only prone to experience a weak peak season but were also positioned to succeed in a “recent” bottom within the back half of this yr (forecasting a ten%-20% decline below second-half, 2019 levels). Fast forward to today, and the projected weak peak season has not only arrived but appears to already be peaking. It might be all downhill from here.
![](https://www.freightwaves.com/wp-content/uploads/2023/07/07/tempsnip-1200x388.png)
SONAR’s Container Atlas, which provides real-time, high-frequency ocean container data, currently shows our proprietary Ocean TEU Volume Index (within the chart above) registering a brand new year-to-date high for U.S.-bound container volumes departing from all origin ports globally. While this high may (at first glance) appear as an upward trend demand or second-half rebound in demand, upon further examination, this index seems to really be signaling that the “peak” of peak season has likely arrived. While the primary half of this yr saw a full-on reversion of U.S. import volumes to pre-pandemic levels, it will be significant to notice that throughout the past two years the true peak of peak season for U.S.-bound containers (departing from abroad) was reached in July (one to 2 months sooner than in years past). Now, this yr’s peak season appears to be following this same trend when the following seven days (white shaded area within the chart above) of departing container volumes. If these volumes depart over the following week as expected, they’re prone to mark the height of peak season and start rolling over into a gentle downtrend for U.S-bound container volumes below second-half, 2019 levels.
![](https://www.freightwaves.com/wp-content/uploads/2023/07/07/Bookings-1200x394.jpg)
For the reason that Ocean TEU Volume Index is measuring container volumes on their date of departure from all origin ports all over the world, to higher understand the following few weeks of demand we are able to look further upstream to the Ocean Bookings Index (within the chart above). This index measures container volumes on the date that they’re booked and confirmed (allocated a departure date) with ocean carriers; subsequently, it provides additional visibility into what future demand will appear like by measuring U.S. containerized import volumes as much as an extra two to 3 weeks (on average) upfront of their estimated departure date. As we are able to see, the Bookings Index is clearly signaling that there’s already less U.S. containerized import volume being booked, which further adds to the likelihood that this downward trend in recent volumes is ready to proceed for the following one to 2 weeks. But, more importantly, it adds credibility to the likelihood that the height of peak season is already here.
![](https://www.freightwaves.com/wp-content/uploads/2023/07/07/Rejections-1200x421.jpg)
Because the Ocean TEU Volume Index and Booking Index are each displaying clear warning signs that volumes are likely peaking and triggering the beginning of a descent toward a brand new bottom in future loaded import TEU volumes for 2023, the Ocean TEU Rejection Index (within the chart above) can be prone to be peaking for container volumes heading to U.S. ports. Rejections peaking concurrently alongside a peak in container volumes also serves as a proof as to why rates on major U.S. import lanes received at the very least a small portion of the proposed general rate increases (GRIs) at first of this month. But, a very powerful takeaway for a way current market conditions will impact spot rates is the proven fact that rejection percentage for U.S. containerized import volumes didn’t exceed the extent they reached in mid-April when trans-Pacific Eastbound rates saw their largest single GRI of 2023 implemented. This importance nuance highlights the clear (and seemingly increasing) weakness in the flexibility of ocean carriers to meaningfully increase spot rates within the face of deteriorating container demand, and thus, further increases the likelihood that spot rates will break through their year-to-date lows (reached in early April — prior to the big April 15 GRI) and discover a recent bottom (which we warned of again last week).
![](https://www.freightwaves.com/wp-content/uploads/2023/07/07/Lead-Times-1200x415.jpg)
One other import signal from SONAR’s Container Atlas could be present in measuring how far upfront helpful cargo owners (BCOs) are making their bookings prior to their intended vessel’s departure date. Within the chart above, we are able to see a transparent downward trend on this measurement, which is usually a key indicator into how BCOs are perceiving tightness in capability throughout the greater ocean container market. This lack of urgency from BCOs is a supplementary signal (alongside the aforementioned indices) that they (BCOs) see no have to book their volumes further out upfront of their intended dates of departure to higher offset any volatility attributable to potential increases in demand. In other words, current lead times from BCOs are in step with expectations based on current market conditions and appear to also indicate that they’re likely well aware (at the very least) that this yr shall be a weaker peak season for volumes.
![](https://www.freightwaves.com/wp-content/uploads/2023/07/07/Capacity-1200x423.jpg)
As for the supply side of the container market, it stays projected to extend barely throughout the second half of 2023 (following an analogous upward trend as seen within the chart above over the past few months). These projections highlight an obvious disparity, and steadily increasing imbalance, between supply and demand. This growing imbalance will likely persist within the months ahead as recent capability comes online and U.S. containerized import volumes embark on a gentle decline looking for a brand new bottom within the back half of 2023. Under these circumstances, it is cheap to expect that ocean carriers will go to even greater lengths to try to extend the frequency and use of blanked/canceled sailings, or possibly even introduce recent strategies for cutting/controlling capability to assist offset the increasing imbalance between supply and demand. This may likely include (but not be limited to) carriers selecting to retire or scrap older vessels of their fleets or idling them until demand does experience a transparent rebound in some unspecified time in the future down the road.
![](https://www.freightwaves.com/wp-content/uploads/2023/07/08/image.jpg)
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As we’ve repeatedly warned through Q2 of 2023, demand peaking just as we enter the primary few weeks of the second half of 2023, coupled with an excessive amount of vessel capability on the water, has the potential to trigger a more intense price competition amongst ocean carriers as they strive to achieve market share throughout the remainder of this downcycle. Consequently, it could result in heightened tensions throughout the three ocean carrier alliances, leading to significant disruptions of their current structures and potential full-on reorganization throughout the ocean container market. This possible disruption of the present alliance structures could further erode any stabilizing influence they might have had on spot rates, further reducing their ability to take care of GRIs effectively. This is able to create a rate environment where a brand new bottom for spot rates in 2023 could be almost inevitable across U.S. import lanes.