Affected by weak global demand and sluggish economic prospects, freight rates on major routes in the market continue to decline and may remain in a downward trend for a long time.
The latest Shanghai Container Freight Index (SCFI) was 2847.62 points, down 306.64 points or 9.7% from the previous period. It was the largest weekly decline since the epidemic and has fallen for 12 consecutive weeks.
SCFI’s latest freight rates on major routes continued to fall across the board:
The freight rate from the Far East to the US West fell sharply from US$5,134 last week to US$3,959/FEU, a weekly drop of US$1,175, a 22.9% drop;
The freight rate from the Far East to the US East was US$8,318/FEU, down US$483 or 5.5% on the week;
The freight rate from the Far East to Europe was US$4,252/TEU, down US$189 or 4.3% on the week;
The freight rate from the Far East to the Mediterranean was US$4,774/TEU, down US$297 or 5.9% on the week;
The freight rate for the Persian Gulf route was US$1,767/TEU, down US$290 or 14.1% on the week.
The freight rate on the Australia-New Zealand route was US$2,662/TEU, down US$135 or 4.8% on the week.
The freight rate on the South American route was US$7,981/TEU, a week-on-week decrease of US$847, or 9.6%.
Among them, the West American, Persian Gulf, and South American routes suffered larger declines, with weekly declines of 22.9%, 14.1%, and 9.6% respectively. The freight rate on the US-West Route plummeted by US$1,175 in a week, falling below US$4,000, a decrease of nearly 23%.
Analysts at the Shanghai Shipping Exchange believe that as inflation continues to remain high, the Federal Reserve is forced to continue to adopt methods such as raising interest rates and shrinking its balance sheet to curb inflation, and the U.S. economic situation will tend to deteriorate further in the future.
The U.S. market’s sluggish growth in transportation demand and relatively weak supply and demand fundamentals have resulted in a sharp decline in freight rates on the West-U.S. route.
Lars Jensen, chief executive of liner consultancy Vespucci Maritime, said the capacity shortage that supported soaring ocean freight rates over the past two years has ended and freight rates will continue to fall.
“Current data show that the basic support for high freight rates has now basically disappeared, and is expected to weaken further.” He said.
The analyst added: “Although there is still a rebound in the downward trend of freight prices, such as a sudden surge in short-term demand or the emergence of unexpected bottlenecks, which may lead to a temporary rebound in freight prices, overall freight prices will continue to trend upward. More normal market levels are falling. The question is just how deep will it fall?”
The latest Ningbo Export Container Freight Index (NCFI) closed at 2160.6 points, down 10.0% from last week. Among the 21 routes, the freight index of 5 routes increased, and the freight index of 16 routes fell.
The Thai-Vietnam route market fluctuates greatly. Due to the large gap in freight demand on this route, which fell 37.1% from last week, the booking price in the spot market dropped sharply, and there were a small number of “zero” freight rates and “negative” freight rates.
European and continental routes: The routes continue to suffer from an imbalance of oversupply, and booking prices in the spot market continue to decline, with the month-on-month decline hitting a new high for the year.
The freight index for the European route was 2920.3 points, down 10.8% from last week; the freight index for the east-west route was 2475.7 points, down 11.2% from last week; the freight index for the east-west route was 3070.9 points, down 11.6% from last week.
North American route: The market conditions continued to be weak, and the month-on-month decreases in freight indexes for the East and West routes were the largest in the year.
Among them, the spot market booking price for the US-Western route has fallen below US$4,000/FEU. The freight index for the US East Route was 2810.1 points, down 4.6% from last week; the freight index for the US West Route was 2245.8 points, down 16.3% from last week.
Middle East routes: Transportation demand has not improved, booking prices in the spot market continue to fall, and freight rates are less than one-third of what they were at the beginning of the year.
The Middle East route index was 1125.2 points, down 8.8% from last week.
Thailand-Vietnam route: There is a large gap in freight demand on the route, booking prices in the spot market have fallen sharply, and there are a small number of “zero” freight rates and “negative” freight rates. The freight index for the Thailand-Vietnam route was 226.1 points, down 37.1% from last week.
Drewry’s World Container Freight Index (WCI) has declined for 27 consecutive weeks. The latest WCI composite index continued to fall sharply by 5% to US$5,661.69/FEU, down 43% from the same period last year.
Shanghai-Los Angeles freight dropped by 9% from US$565 to US$5,562/FEU;
The freight rates of Shanghai-Rotterdam and Shanghai-Genoa fell by 5% to US$7583/FEU and US$7971/FEU respectively;
The freight rate from Shanghai to New York dropped by 3% or US$265 to US$9,304/FEU.
U.S. consumer demand has held up better than Europe, and port congestion on the East Coast has supported rates that are still higher.
Drewry expects freight rates to continue falling in the coming weeks.
Additionally, the outlook for long-term freight rates is equally concerning for carriers as they…It’s approaching contract renewal season.
“Demand is falling and, as expected, long-term freight rates are starting to follow the trends set by the spot market,” said Patrik Berglund, CEO of freight benchmarking firm Xeneta.
Falling freight rates have become a trend at present. Strikes and congestion levels at major European and American ports will determine the speed of freight rate declines. The next step will be to see whether inventory is digested, inflation eases, and whether there is seasonal demand and general commodity replenishment to support freight rates.
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