Although the container shipping industry is entering its traditional peak season, container prices and spot freight rates are still down significantly year-on-year.
At the same time, Alan Murphy, CEO of maritime data analysis company Sea-Intelligence, pointed out that ship utilization will continue to remain at a low level and freight rates will maintain a downward trend.
Container freight rates continue to fall
According to the latest data from the Shanghai Shipping Exchange, the Shanghai Export Container Freight Index (SCFI) fell 132.84 points to 3429.83 points, a decrease of 3.73%, falling for ten consecutive weeks and falling back to the low since mid-May last year.
The four main routes all fell, with the US-Western route plunging for two consecutive weeks and the decline continued to expand.
In the latest period, freight rates on major routes continued to fall:
◾The freight rate from the Far East to the West America is 5,782 US dollars/FEU, down 371 US dollars or 6.03% on the week;
◾The freight rate from the Far East to the US East is US$8,992/FEU, down US$114 or 1.25% on the week;
◾The freight rate from the Far East to Europe is US$4,788/TEU, a weekly decrease of US$183, or 3.68%;
◾The freight rate from the Far East to the Mediterranean was US$5,488/TEU, down US$150 or 2.66% on the week;
◾Southeast Asia route, freight rate is US$749/TEU, down US$26 or 3.35% on the week;
◾For the Persian Gulf route, the freight rate was US$2,231/TEU, down 5.9% from the previous issue.
◾On the Australia-New Zealand route, the freight rate was US$2,853/TEU, down 1.7% from the previous issue.
◾The South American route has fallen for four consecutive weeks, with the freight rate at US$8,965/TEU, a weekly decrease of US$249, or 2.69%.
Among them, the western US line and the European line suffered larger declines last week, with weekly declines of 6.03% and 3.68% respectively. Routes from the Far East to South America and routes between Asia also fell across the board.
Industry insiders pointed out that the North American line’s decline has intensified, and the short atmosphere of global container ships has become stronger. Among them, the US West Line was previously worried about strikes, so the cargo volume was transferred to other ports. However, the cargo volume has plummeted during the recent peak season. Therefore, it has become the hardest-hit area with the largest drop in freight rates among the four major routes.
At the same time, the Drewry World Container Freight Index (WCI) has declined for 25 consecutive weeks. The latest quotation on August 18 fell to 6224 points, a weekly decrease of 3%. Shanghai to Rotterdam and Los Angeles both fell 5%, and only Shanghai to New York freight rates were flat, but whether this is a signal to stop the decline remains to be seen.
In addition, the latest Ningbo Export Container Freight Index (NCFI) released by the Ningbo Shipping Exchange closed at 2588.1 points, down 6.8% from last week. Among the 21 routes, the freight index of 3 routes increased, and the freight index of 18 routes fell. Among the major ports along the “Maritime Silk Road”, the freight rates of 16 ports all fell.
◾European route: The freight index for the European route was 3342.3 points, down 8.2% from last week; the freight index for the east-west route was 3095.8 points, down 3.1% from last week; the freight index for the east-west route was 3798.6 points, down 3.1% from last week; It fell 6.0% on the week.
◾North American route: The freight index for the US East Route was 3078.3 points, down 2.3% from last week; the freight index for the US West Route was 3119.3 points, down 7.5% from last week.
◾Middle East Route: The freight index was 1422.4 points, down 21.9% from last week.
◾Thailand-Vietnam route: The freight index was 385.7 points, down 30.2% from last week.
Last year experienced the greatest glory in the history of container shipping, with freight rates rising and shipping companies making a lot of money. Compared with previous years, the export sea freight rate this year is hugely different. This year it has dropped from the beginning of the year to the middle of the year. Whether it is Southeast Asia, the Middle East, Europe, or the Americas, global sea freight prices are falling rapidly.
Taking Southeast Asia as an example, freight rates on Southeast Asian routes have plummeted recently, nearly halving. Freight rates to some ports in Southeast Asia have risen from around US$300 to a high of 2,000-3,000, and now they have dropped to around US$300.
Possible reasons for the plummeting sea freight rates in Southeast Asia are that inflation has led to a decline in consumer purchasing power, a serious shortage of freight demand, a surplus of space on the Thailand-Vietnam route, and freight rates have continued to fall. The worse the market conditions are, the more serious the involution will be, and there will be rush for goods and price-cutting competition in the market.
Spot freight rates will maintain a downward trend
It is reported that FreightWaves CEO and founder Craig Fuller recently boldly predicted on Twitter that by November, container freight from China to the West Coast of the United States will fall to US$3,900, down from the peak of US$20,586 a year ago. More than 80%.
Against the backdrop of falling container costs, shipping data analytics firm Sea-Intelligence reported that the trend in lower demand could be offset by lower capacity injections.
“Although demand increased by 0.6% year-on-year in June, this does not change the fact that demand has been on a downward trend since the peak season demand surge in 2020.” Sea-Intelligence CEO Alan Murphy said.
The more relevant question, therefore, is how demand growth is matched by deployed capacity. And currently,While demand growth is slowing, capacity growth is also increasing. For the trans-Pacific route, the sharp decline in vessel utilization in May was also continued in June, with vessel utilization at around 89%.
There is a correlation between vessel utilization and spot freight rates on the transpacific route. “Essentially, once vessel utilization on the transpacific trade reaches 90 to 95%, meaning all capacity is fully utilized, spot freight rates will increase significantly,” Murphy said.
“Now that we have seen two consecutive months of vessel utilization below 90%, it is clear that the market is no longer able to sustain extremely high spot freight rates.”
“Most importantly, average vessel utilization on major trade routes continues to be below the threshold that drove the record vessel utilization peaks of the past 18 months.” Murphy pointed out, “As a result, the trend of downward spot freight rates is set to continue. ”
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