A shortage of containers has entirely reversed into a glut as crashing shipping rates and cancelled sails gain momentum during what is supposed to be the busiest shipping period of the year.

In a report on Monday (Nov 14), financial blog and news aggregator Zero Hedge said the latest Bloomberg Trade Tracker reveals an ominous outlook for world trade due to soaring interest rates, the war in Ukraine, a slowdown in the US economy, and zero-Covid measures in China.

The blog said US shipper FedEx and Danish shipping giant AP Moller-Maersk A/S have been vocal about emerging signs of a global slowdown.

“Global trade is moving backwards this year,” Maersk’s chief executive officer Soren Skou told Bloomberg Television at the start of November.

Meanwhile, FedEx chief financial officer Michael Lenz told an audience at the Robert W Baird Global Industrial Conference earlier this week that his company parked planes cut costs in response to weak demand for package delivery.

Zero Hedge said the Covid boom for goods has evaporated.

It said consumers have switched from buying computers and televisions to spending whatever money they have left on experiences.

“We predicted in May that an inventory glut, i.e. the reverse bullwhip effect, would cool the booming freight market.

“It’s now peak shipping season — retailers have already cancelled overseas orders as freight companies reduce shipping capacity ahead of Black Friday and Christmas,” said the blog.

It said slumping global demand and faltering world trade has led to another problem: a massive container glut at ports.

The blog quoted Hamburg-based software company Container xChange co-founder and CEO Christian Roeloffs as saying there was just not enough depot space to accommodate all the containers.

“With the further release of container inventory into the market (e.g. from the disposal of leasing fleets), there will be added pressure on depots in the coming months.

“This will be a key challenge for some and a competitive advantage for others in the business, especially in China because of the empty container repositioning there,” said Roeloffs.
Source: The Edge Markets