The container shipping market has entered the traditional peak season, and U.S. line freight rates have taken the lead in rebounding, driving the Shanghai Export Container Freight Index (SCFI) to stop falling and rebound.
Different routes have different trends due to their different supply and demand fundamentals. The freight rate per 40-foot container on the US West Route increased by 26.14%, while the freight rate on the US East Route increased by 12.42%.
The surge in U.S. freight rates has caused airlines and cargo owners to face higher transportation costs, and they have to pass this cost on to consumers in order to maintain profits and stable operations.
Freight rates on European routes have remained stable, but many shipping companies have announced that they will raise FAK rates on August 1. It is expected that European routes will also see an upward trend in early August and usher in a surge.
This could further exacerbate tensions in the global shipping market.
US line freight rates rebound
According to a report from the Shanghai Shipping Exchange, the overall capacity of the US East route has been reduced, and the early supply and demand imbalance has been significantly improved. The loading rate of some carriers has rebounded overall, and some flights are fully loaded.
The loading rate of the West Coast route has also rebounded, reaching a level of 90% to 95%. Last week, most shipping companies increased their freight rates based on market conditions, and market freight rates rebounded to a certain extent.
The freight rate from Shanghai to the West Coast is US$1,771/FEU, an increase of US$367, or 26.14%;
The freight rate from Shanghai to East America is US$2,662/FEU, an increase of US$294, or 12.42%.
Market analysts said that after entering the traditional peak season, the cargo volume of the US line has increased. The cargo load in July has improved slightly compared with the increase in May and June. In addition, container shipping companies continue to reduce capacity and work, and small and medium-sized ships have withdrawn from the market. In mid-July, container shipping companies successfully raised freight rates, raising GRI by US$400-450/FEU.
However, there is still uncertainty about the degree of recovery in this year’s peak season, and the extent and duration of this round of freight rate increases remain to be seen.
European lines decline narrowed
According to a report from the Shanghai Shipping Exchange, the overall economic environment in Europe has not improved significantly, and some recent economic data have been generally stable month-on-month.
The supply and demand of routes remained stable, with the loading rate of some flights above 95%. The market freight rate stabilized and was basically the same as the previous period. For Mediterranean routes, the market trend keeps pace with that of European routes, and the booking price in the spot market is basically the same as that of the previous period.
The freight rate from Shanghai to Europe was US$738/TEU, down US$2 or 0.27%;
The freight rate from Shanghai to the Mediterranean was US$1,412/TEU, down US$1, or 0.07%.
Industry insiders pointed out that the European market demand is sluggish, but European freight rates have seen their decline converge, and there may be a chance of recovery by the end of July.
Previously, shipping companies Maersk, CMA CGM, Hapag-Lloyd, etc. have issued announcements to increase FAK rates from Asia to Northern Europe on August 1.
Each 20-foot container rose to 1,025-1,050 US dollars, and each 40-foot container rose to 1,900-1,950 US dollars. Converted based on the spot market freight rate, the increases were as high as 30% and 50% respectively. This is the first increase in the European line this year, and the notice Rates on other routes may also be increased.
Outlook on freight rates for European and American routes
In terms of beauty lines:
Because the shipping company canceled many flights on the West Coast route, the price increase at the beginning of this month only fell back by US$100 in the second week. On the 15th of this month, it was increased by US$400-450, and THE Ocean Alliance was also reported to further reduce flights.
With the end of the strike at Canada’s West Coast port terminals, it remains to be seen whether this round of price increases will be successful and how much the price will fall next week.
In addition, shipping companies have plans to charge a peak season surcharge of US$600 per large container on August 15.
European inflation is serious and the economic situation is not good. Entering the peak season of the third quarter, cargo volume is still hovering at a low level.
The actual cargo load situation is not good, and we have not seen significant work reductions. Since the time for price increase has not yet come, the freight rate performance is still sluggish. However, it may be more difficult to increase freight rates in early August than on the US line, and how much it can increase remains to be tested.
However, many shipping companies and freight forwarders have previously stated that the current actual cargo volume in the European and American markets is not large, and the ability to support freight rate increases is limited.
Countermeasures to increase freight rates
This change in the shipping market has important implications for global trade and the economy. Maritime transportation is an important part of international trade, and goods transported by sea account for a large proportion of global trade.
Therefore, the increase in freight rates will directly affect the supply chain costs of various industries, thereby affecting commodity prices and the global economy.
For cargo owners and shipping companies, they need to take effective measures to deal with the challenge of rising freight rates. On the one hand, they can reduce transportation costs by optimizing supply chains and cargo organization.
On the other hand, they can also cooperate with shipping companies to seek better cooperation models and price negotiations to reduce transportation pressure.