The surprise tightening of the container market in the spring of 2024, which many attribute to an early peak season slamming into temporarily constrained capacity due to the Red Sea diversions, will inevitably cool off as the year goes on as a wave of new vessel capacity hits the water and new containers are churned out by production lines principally in China. Container lines and owners as of May 20 had taken delivery of 176 out of 461 ships scheduled to be delivered in 2024, a pace of 40 new ships per month, according to S&P Global Market Intelligence. “We know that with the new container tonnage coming online at a rapid pace, (the tight market) will be alleviated sometime during the year and we will again see a gradual decline in our spot rates,” Maersk CEO Vincent Clerc said on May 2. There are already signs the market is cooling. Recent data points to slowing US consumer spending while US import container volumes slowed significantly in April. U.S. containerized imports were averaged 17% year over year growth in the 1st quarter but growth slowed to under 5% in April.

But that is not to say that as of mid-June the tightness had eased. Severe port congestion seen in Singapore and many other ports takes months to fully unwind. New container production lines are operating at full tilt and impact will be increasingly felt as the year goes on—but not yet. High container ship charter rates, low idle vessel and scrapping numbers further point to the current squeeze. The situation is thus challenging ocean supply chains yet again with unanticipated higher costs, shortages of containers, port backups and longer transit times just when many shippers are trying to drive down inventory costs due to stubbornly high interest rates. Spot rates on the eastbound transpacific have surged more than 250% since the beginning of April to $6,800 per FEU. Many BCOs are protected to some degree by contract rates signed in March and April at sub-$2,000 levels but volume beyond weekly minimum quantity commitments are exposed. NVOs’ named accounts are being squeezed by carriers demanding spot market or FAK cargo and closely monitoring volumes moved under named account rates.