Reality of ocean container volume far cry from China reopening hype

As the global trade recession began to materialize in 2022, there was a great deal of hype over the potential boost to ocean container demand once the Chinese government ended its COVID restrictions and lockdown measures. But now that hype has faded and what was once hoped to be a great reopening and much-needed boost to volumes is looking more and more like a great flop.

In the chart above, the Inbound Ocean TEU Volume Index from China to the U.S. provides a seasonality view that compares 2023 volumes thus far (white line) with volumes over the past four years. It was late March/early April of 2022 (green line) when the Chinese government announced another round of COVID restrictions and lockdowns. This new round of lockdowns at first appeared as if they would make the transportation of goods to and from major manufacturing hubs nearly impossible. That caused some to automatically (and haphazardly) assume the following scenario: The lockdowns would cause a backlog of goods and pent-up demand that would eventually cause another container surge similar to what occurred after the first round of lockdowns in 2020. But we were able to see a different story playing out in real time through our bookings data.

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Those who were expecting an impending freight surge hadn’t realized that, even though access to the Port of Shanghai was largely blocked due to landside restrictions (i.e., road closures), shippers were able to reroute volumes through the closest alternate major port in nearby Ningbo. As the chart above clearly displays, the resulting decline in Shanghai bookings and container volumes was more than offset by a surge of volumes through Ningbo during that time (from the rerouted Shanghai bookings).

As the year progressed into the second half, global container volumes began plummeting, and there were still no signs of a surge in volumes coming out of China. As the hopes of a potential freight wave eventually began to fade, it was still widely believed that China’s reopening would (at least) be a major factor in helping boost volumes and possibly create a “soft landing” for the global ocean container market. Unfortunately, that boost in volumes never appeared. Instead, volumes continued to soften out of China during a largely nonexistent peak season. The weakening volumes were then met by emerging headwinds such as the inventory glut, weakening consumer demand and increasingly negative economic landscape.

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