Containerization Forecast and Review 2023 - 2024

To mark the start of a new year we follow tradition and make a short review of the year gone by, while also attempting to make some predictions of what’s to come in the year we are walking into.

A Review of 2023

Entering 2024 we are leaving behind a year characterized by extreme capacity shortage in the finished vehicle transport sector, high growth of global vehicle sales, especially for EVs, and the advent of China as a major automotive exporter. Below we look at some of the major happenings and trends of 2023 in both the automotive and shipping sectors, and how they add up to our predictions from last year.

Automotive Market in 2023

In last year’s “start of the year post”, Containerized Vehicle Outlook 2023, we discussed the drop in global vehicle sales in 2022 compared to pre-covid and mentioned an expected global sales number of 83.6 million vehicles. 2023 delivered way beyond that, according to S&P Global Mobility, 2023 saw global sales of almost 86 million vehicles. A solid 8.9% increase from 2022.

The chip shortage which plagued the industry in 2022 became a non-issue in 2023. This is much due to lowered chip demand from other industries as well as solid measures taken both by the chip suppliers and various automotive OEMs to ensure a stable supply of chips both now and in the future. There are however still some structural challenges, and though car makers have been able to stock up, there is still a risk that shortages can reoccur in the future, though as mentioned by S&P Global Mobility: No chip supply is foreseen in 2024.

Global production levels finished at around 89.8 million units, an increase of 9% from 2022. This was led by the high sales growth mentioned above, and the need to restock inventories around the world. The production growth did, however, not really ease the cost of second-hand vehicles which are still are still categorized as unrealistically high.

One topic where we hit the nail on the head in our January 2023 predictions was with the growth of electric vehicles. 2023 saw global sales BEVs of around 9.6 million units, or roughly 12% market share.

Car Transport Situation in 2023

In the shipping sector, rates continued dropping until the very end of the year. Drewry, through their World Container Index, reported the bottom of the market in the end of October where the index measured at only $1,342 USD per 40ft. The index has since increased and was at last reporting date before Christmas at $1,661 USD per 40ft.

The capacity issues we mentioned in the RoRo sector has only grown worse over 2023. We did a wider analysis of this in our previous post Vehicle Shipping - Container vs RoRo: Capacity Situation, here we outlined the low level of new deliveries throughout 2023 and the lack of any improvement to the sector before the end of 2025.

The growth of electric vehicle transports and especially the growth in Chinese exports have caused challenges to global finished vehicle supply chains. Shipping lanes from China to markets like Europe, South America, Southeast Asia, and the Middle East has grown drastically over 2023. The new volume added combined the ongoing RoRo shortage has resulted in a containerization boom on these lanes. We discussed this in a previous post: Vehicle Shipping - RoRo & Containerization Irregularities of 2023.

And while our predictions that there would be an increased emphasis on shipping cars in containers, and especially EV’s, have been mostly correct, containerized shipments has mostly been a last-resort effort and have served the spot-market more than being a long-term solution implemented by OEMs themselves. So, our prediction that this would be a tool to be added by the OEM’s in a structured way has been somewhat wrong, though there has been some car-makers making strategic approaches to shipping cars in containers, the majority has only used it as a crisis mitigation tool.

Forecast of What May Come in 2024

The very start of 2024 brings further trouble to global trade with attacks on major ships sailing through the Red Sea on their way to or from the Suez Canal. What started with the hijacking of the RoRo carrier Galaxy Leader in the end of November last year has since escalated to a very hot situation with several larger vessels being subject to attacks by Houthi rebels from Yemen. Below we look further at some predictions of what might come in 2024 for both the automotive industry, and for the shipping sector responsible for moving cars around the world.

Automotive Trends to Follow in 2024

In a December blog post S&P Global Mobility forecasts 88.3M auto sales in 2024.This will be a modest, but healthy, growth of 2.8% year-over-year. There is still some pent-up demand to fulfill and inventories to be restocked, but the research and data provider remains wary as consumer demand might be hampered by high pricing and more difficult credit and lending conditions. And thus do not expect the fast-paced growth of 2023 to remain.

A continued focus on electric vehicles is expected. As OEMs are reaffirming their ambitions to keep on the electric track, global sales are projected to reach 13.3 million through 2024 – accounting for 16.2% of all passenger vehicles sold, a 38.5% increase year-on-year. The same NEV policies as mentioned in our last years entry is expected to continue to drive this trend forwards, though some roadblocks might occur as governments around the world are slowly removing incentive schemes and the various downstream costs of electric vehicles are becoming more evident.

One ongoing policy concern for some players in the EV scene is the ongoing EU anti-subsidy probe into electric vehicle imports from China. OEM’s building electric cars in China for exports are on the receiving end of generous incentive schemes over a range of years, and the European Union is now setting out to figure out if this is against trade compliance and thus damaging European car manufacturers. The results of this probe will be ready in the middle of 2024 and could potentially see additional tariffs added to EV imports from China. More details can be found in this EU report: EU anti-subsidy probe into electric vehicle imports from China.

Shipping Industry Forecast in the New Year

As the above introduction mentions, the year starts with new shipping disruptions in the Red Sea. As shipping companies are redirecting their vessels around Africa, trade which would otherwise go through the Suez Canal is hit with expensive premiums. This new Suez chokepoint comes on top of the ongoing Panama Canal drought which is also hampering transits between the Pacific Ocean and the Gulf of Mexico. These two bottlenecks to global shipping will surely have some short-term effect on price and delivery times, but for the container industry it could end up being a boon rather than a curse, as the industry is already struggling with low rates due to overcapacity.

Vehicle handling ports, especially in Europe, have been struggling to keep up with volume of cars processed through main ports for some years already. According to Automotive Logistics in their article An automotive supply chain in transition – the year in review, this is a trend that will last for several years. At Kar-Tainer we have dipped by the topic of vehicle handling automation a couple times over the past year, and we believe this is surely something which will garner more interest in the year(s) to come. As labor shortages hit, operating cost increase, and capacity bottlenecks arrise, being able to automate port-side or vehicle yard handling can bring huge efficiencies to global car transportation.

According to New Ships Orderbook, another 36 car carriers of various sizes will be delivered to operators around the globe through 2024. This will ease the situation a bit, but still will not tilt the industry out of the current under-capacity situation. Gram Car Carriers have predicted that the global fleet will still be lacking around 24 large RoRo vessels to keep par with demand. In addition to this, the Norwegian tonnage provider reports that many of the smaller sized RoRo vessels are being put into operation on typical deep-sea lanes, something which is removing highly needed capacity on fast turn-around short-sea routes, especially in Europe.

Containerization Predictions in 2024

Following tradition, we look at the expected developments both in the automotive and shipping market to attempt draw some predictions for what we can expect for our niche of vehicle containerization through 2024. Our best guesses follows:

Strategic approach to containerization:

Having experienced huge supply chain disruptions due to chip shortages in 2022, car manufacturers have had high focus on mitigating future chip troubles. As finished vehicle transport capacity has been the top issue in 2023, we expect to see OEMs to offer the same level of attention to this. Strategic approaches from the OEMs on how to mitigate issues stemming from lack of transport capacity could put cars in containers higher on the agenda with many OEMs. With capacity providers currently holding the best hand in commercial negotiations, it could also be possible to see a return to long-term contracts, as opposed to the very short contract terms which have been the norm in automotive logistics over the past decade.

Heightened focus on quality:

Some carmakers which already have skin in the game when it comes to vehicle containerization have already established quality guidelines and expectations of how their cars are shipped in containers. However, the huge growth in containerized shipments over the past year, especially coming out of China, has resulted in several sub-par solutions and methods for shipping cars in containers, leading to high damage rates and over-complicated operations. As such cases are becoming more visible, we expect there to be an increased focus on quality and proper safety routines for loading and transporting cars in containers.

Continued discussion on EV transport safety:

A continued focus on transport safety of electric cars will remain and drive the discussion around best practices to transport battery electric vehicles and their components. We expect to see a higher focus on safety pushed from the more premium brands offering EVs, however the ongoing growth of the low-value EV segment is likely to lead parts of the industry to have main focus on cost as opposed to safety. This could lead to further battery related incidents in the global vehicle transport scene through the year.

Increase of cars in containers on  Asia to Europe trade:

The new vehicle trade patterns which are emerging, with China as a huge exporter especially to Europe, South America, the Middle East, and Southeast Asia, is set to cause both challenges and opportunities to vehicle transporters this year. As capacity on the major Westbound Lane from Asia to Europe is tight, containerization will continue to be a good option for car transport through the year.

Increase of cars in containers in various short-sea scenarios:

New and bigger RoRo vessels will increase demand for containerization on short-sea lanes, especially in Europe, North America, and Southeast Asia. As most RoRo capacity which can be marshalled is put into deep-sea operations, smaller container vessels with more frequent sailings can offer good alternatives for vehicle transportation within regions.

Concluding

We wish everyone a great start to the year and remind that we specialize in the solutions needed to safely and efficiently load and ship big quanta of cars in containers in an efficient and safe manner. If you want to learn more or keep the discussion going on what 2024 will bring for cars in containers, get in touch with your closest Kar-Tainer representative or reach out to us through the website contact forms.