China's Container Trade Faces Hold-Offs Due to Supply-Demand Imbalance

Data from Container xChange reveals that while there is a surplus of units held up in Russia, capacity in that region remains saturated.

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Data from Container xChange reveals that while there is a surplus of units held up in Russia, capacity in that region remains saturated. This situation has not created enough confidence for significant price drops and has resulted in a cautious approach from both buyers and sellers, leading to a gradual filling up of depots. However, the current depot pressure is not yet strong enough to prompt traders and sellers to lower their price expectations, nor is there significant pressure from buyers to increase their price expectations.

“There is significant imbalance between supply and demand price expectations for containers. Buyers are expecting price reductions in weeks to come, while sellers are holding off the inventory as they expect prices to remain stable due to tight capacity, especially after the diversions due to the red sea and highly imbalanced trade, particularly, for example from China into Russia,” says Christian Roeloffs, co-founder and CEO of Container xChange. "Looking ahead, while mid- to long-term forecasts suggest a necessary adjustment in prices to restore liquidity, the present market sentiment indicates a reluctance to anticipate significant price drops."


Key takeaways:

  • China’s exports to Russia grew by 12.5% year-on-year in the first two months of 2024, while imports rose by 6.7%.
  • The buyer sentiment of further price declines is also echoed by the container price sentiment index (xCPSI), where the index value fell from an all-time high of 83 points in the last week of January to 22 points as of March 14.
  • The holding off of the capacity is also due to a demand lull. The recent decrease in freight rates, from $3,351 on Feb. 23 to $3,069 on March 8, represents an approximate 8.41% decline. This trend indicates a more balanced market and aligns with our observation that container prices are not showing significant increases in March.
  • In 2024, China's economic outlook is characterized by a blend of opportunities and challenges. It is expected that the country's leadership will target a growth rate of approximately 5%, supported by robust government spending to stimulate economic growth and bolster public confidence. Fiscal expansion is anticipated to be a key strategy in driving growth, particularly through increased public investment and fiscal transfers. Geopolitically, China faces complexities in its relationships with Western nations. Relations with emerging economies are also expected to be strained, especially regarding security issues in the South China Sea.

"The decline in freight rates and the steady container prices suggest that demand is under pressure. Additionally, the management of the Red Sea crisis has alleviated concerns of sudden container price rises, providing a more predictable environment for freight forwarders and stakeholders," Roeloffs adds.