As container charter rates start to sink, shipping margins set to shrink
Container shipping charter rates are set for a course correction after touching historical highs in 2021 and staying elevated so far this year.
Charter rates were up 156% on-year for the first seven months of this year. Over the remaining months, however, the rates are expected to decline, though still ending the year 40-70% higher.
A widely anticipated recessionary environment is expected to weigh on demand in key consumption countries in the West towards the end of the year. A pickup in the pace of container production post the Chinese New Year and the Winter Olympics has tamped rates, too.
CRISIL Research expects charter rates to slide a further 30-50% in 2023 on account of the expected recessionary environment in majority of the consumption economies and consequent fall in demand for discretionary goods.
To be sure, a large part of the demand pick-up in 2021 — and thereby the runup in charter rates — had also stemmed from a rise in demand for discretionary goods in major consumer countries in the West, which is seen reversing now.
