FreightWaves came out with this piece today, that says:
The latest ocean container bookings data reveals that despite the strong levels of inbound cargo during the first five months of 2022, import demand is not just softening — it’s dropping off a cliff. Because capacity on the trans-Pacific has remained relatively stable, Drewry’s container spot rates from China to the West Coast have plunged 41% month-over-month to $9,630.
Freight forwarders will enjoy expanding margins on ocean freight, while U.S. trucking carriers and intermodal volume providers may start to see volume risks.
Consumer buying patterns are rapidly normalizing to pre-COVID levels, and U.S. retailers are stuck with too much inventory. Target (NYSE: TGT) shares dropped Tuesday morning after executives said the company would mark down unwanted items, cancel purchase orders and move quickly to get rid of excess inventory.
Container imports bound for the U.S. have dropped over 36% since May 24. (This index measures departing container volumes at the port of origin). This is a troubling sign for domestic U.S. freight markets that have been benefiting from an unprecedented surge of containerized import volumes over the last 18 months. Since ocean transit times for these inbound container volumes have recently been averaging between 30 and 35 days, we will begin seeing the softer volumes show up at U.S. ports in the first couple of weeks of July.
They note the following reasons - details in the post:
- There is inventory glut from consumers reverting back from goods to services
- Consumer is “getting crushed” (added quotes as not sure of the solidity of their argument - consumers take credit also when they feel good about their finances)
- The Shanghai container surge we’re expecting with reopening will not happen because most of those were routed to other ports
The Drewry Index has remained flat while the Baltic Index has actually gone down, so at the very least, the data does not contradict what FW is saying.
Let’s keep an eye on this, and if the Shanghai reopening bump doesn’t show up in a week or two, we might have to consider that the good times in containerships is over for now.
In terms of positions, will wind down the outstanding call I have, though will hold on to the ZIM commons as their cost basis makes the dividend still way worth it.