Part 1: Shipping industry trends in 2023

Due to cautious consumer spending, low growth in container demand in 2023 and beyond

Due to longer-term factors such as inflation, increased interest rates, and a structural shift of consumer spending patterns from goods to services, cautious consumer spending in 2023 is likely to extend into 2024. Households are expected to prioritize essentials over discretionary expenses, impacting demand for imported manufactured products.

In 2023, container trade contracteddue to deteriorating market conditions. The surge in empty container stockpiles during end of 2022 was an early indicator of the decline, driven by advanced ordering to secure timely deliveries. A combination of more rational consumption patterns and destocking practices contributed to diminishing cargo volumes. Moreover, European ports faced setbacks due to sanctions imposed on Russia. Prominent European container hubs such as Rotterdam, Antwerp-Bruges, and Hamburg, which serve as transshipment points to Russia, witnessed a decline in container volumes and figures since the first half of 2023.

Deliveries increasing to 2.95 million TEUs pose risk of oversupply in 2024

The pace of deliveries picked up this year, expected to go higher throughout 2024, and stay strong in 2025. 2.48 million TEUs was set for delivery this year, 2.95 million TEUs next year, and 2.26 million TEUs in 2025.

Carriers may have stumbled in over-ordering ships, resulting in an oversupply situation in the global market. This surplus could trigger intense competition among carriers, leading to price reductions that may adversely impact their long-term profitability.?

Geopolitical uncertainties leading to shift in trade routes in 2024

Geopolitical uncertainties in 2023 significantly impacted the shipping industry, and these effects are expected to persist in 2024. The Russia-Ukraine conflict led to the closure of Black Sea ports, causing congestion and delays in goods transportation. In the wake of Russia's withdrawal from the Black Sea Grain initiative in July 2023, Ukraine's exports declined, leading to price hikes. While a promising global outlook has brought some stability to prices, the global food supply remains unstable due to the war and Russia's blockade of Black Sea ports, hampering Ukraine's capacity to export grains and food products to the global market.

A potential China-Taiwan conflict in the near future could have significant repercussions for global trade, impacting trading in 2024 and beyond. The Taiwan Strait, a vital passageway for vessels traveling between China and the West, as well as from Japan, South Korea to Europe, may face closure. According to reports from Bloomberg, this crucial waterway saw nearly half of the world's container fleet and 88% of the largest ships by tonnage passing through it in the current year. Should this region become inaccessible, it would necessitate the utilization of less efficient alternative routes, resulting in increased operational costs and various challenges, such as vulnerability to typhoons.?

The expansion of BRICS, now including Saudi Arabia, Iran, Ethiopia, Egypt, Argentina, and the United Arab Emirates, is set to diversify trade routes, introduce alternative payment systems, and boost infrastructure development. Energy cooperation and resource competition may reshape shipping dynamics. The outcome hinges on how BRICS leverages its expanded influence in the evolving global context, offering both opportunities and challenges for the shipping sector.

China plus one diversification to become more evident in 2024

Many factors are driving companies to diversify their global operations, shifting their focus away from China. Prominent among these factors are the ongoing trade tensions between the United States and China, rising labor costs, and concerns about potential future manufacturing disruptions, similar to those experienced during the peak of the COVID-19 pandemic.

Completely disengaging from China is a challenging task, given the extensive electronic supply chains that China has meticulously developed over the past two to three decades. However, an increasing number of companies are making strategic moves to relocate their final manufacturing and assembly processes outside of China, while still relying on Chinese suppliers for essential raw materials.

It's important to note that establishing a manufacturing presence in a new country is not an instantaneous process; typically, it is more than around two years. Anticipated growth in production in these alternative regions is poised to accelerate in 2024, with the most significant transitions occurring after 2025.