The container shipping market is in an irreversible decline. Freight rates have fallen for the 22nd consecutive week, and the decline has further expanded.
Freight prices fell for 22 consecutive weeks
According to the latest data released by the Shanghai Shipping Exchange, the Shanghai Export Container Freight Index (SCFI) fell by 136.45 points to 1306.84 points last week. The decline expanded from 8.6% in the previous week to 9.4%, expanding for the third consecutive week. Among them, the European line is still the hardest hit area by the collapse of freight rates.
The latest route index:
The freight rate per TEU on the European line fell by US$306 to US$1,172, a decrease of 20.7%. It has now fallen to the starting point in 2019 and will face a battle to defend US$1,000 this week;
The freight rate per TEU on the Mediterranean line fell by US$94 to US$1,967, falling below the US$2,000 mark, a decrease of 4.56%.
The freight rate per FEU on the US West Line fell by US$73 to US$1,559, a decrease of 4.47%, a slight increase from 2.91% in the previous week;
The freight rate per FEU on the US East Line fell by US$346 to US$3,877, falling below US$4,000, a decrease of 8.19%, which was slightly less than the 13.44% of the previous week.
Data provided by Drewry’s latest global shipping market report shows that the World Containerized Freight Index (WCI) fell another 7% last week and fell 72% compared with the same period last year.
Industry insiders said that after the Far East-Western America line took the lead in plummeting, the European line has followed suit and has seen an increase in decline since November. Last week, the decline expanded to more than 20%. The European energy crisis may accelerate the local economic recession. Recently, cargo volume to Europe has dropped sharply, and freight rates have also plummeted.
However, the latest decline in freight rates on the Far East-US West Line, which previously led the decline, has converged, which shows that the market is unlikely to remain in an imbalance between supply and demand forever, and will gradually adjust the supply of shipping capacity.
Analysts in the industry pointed out that it seems that the fourth quarter has entered the off-season for the ocean line, and it is normal for the market volume to decrease. The US-Western line has stabilized, and the European line has expanded its decline. Freight rates may continue to fall until after the Spring Festival in the first quarter of next year; The fourth quarter is the traditional peak season for offshore shipping. With the Spring Festival approaching, a rebound in cargo volume is still expected.
Shipping lines in ‘panic mode’
Ocean shipping lines are in panic mode as ocean freight rates plummet to new lows as the recession and bookings for space from China to Northern Europe and the U.S. West Coast dwindle.
Despite aggressive blanking measures that have reduced weekly capacity on trade lanes by more than a third, these have failed to mitigate the sharp fall in freight rates in the short term.
According to media reports, some shipping companies are preparing to further reduce freight rates and relax or even waive demurrage and detention conditions.
A UK-based freight company executive said the westbound market appeared to be in panic.
He said: “I get about 10 emails a day from agents with very low prices. I recently got an offer in Southampton for $1,800, which is crazy and looks panicky. There is no Christmas in the westbound market. The holiday peak is mainly due to the economic recession, and people no longer consume as revenge as they did during the epidemic.”
At the same time, in the trans-Pacific region, short-term rates from China to the US West Coast are falling to the level of sub-economic regions, even dragging down long-term freight rates, and operators are forced to temporarily reduce contract prices with customers.
According to the latest data from the Xeneta 40 feet $5,045.
Shipping companies continue to suspend sailings and jump to ports
According to the latest data released by Drewry, in the next five weeks (weeks 47-51), 98 cancellations have been announced out of a total of 730 scheduled sailings on major routes such as trans-Pacific, trans-Atlantic, Asia-North Europe and Asia-Mediterranean. For sailings, the cancellation rate is as high as 13%.
During this period, 60% of the blank sailings will occur on the eastbound transpacific route, 27% on the Asia-North Europe and Mediterranean route, and 13% on the westbound transatlantic route.
Among them, THE Alliance canceled the most voyages, announcing 49 cancellations; 2M Alliance announced 19 cancellations; OA Alliance announced 15 cancellations.
Drewry said that as the shipping industry enters the winter holiday season, inflation remains a global economic issue, limiting purchasing power and demand.
As a result, spot rates continue to fall, particularly from Asia to the US and Europe, suggesting a return to pre-COVID levels could come sooner than expected. Several airlines expected this market correction, but not at this speed.
�Active capacity management has proven to be an effective measure to support rates during the epidemic. However, in the current market, blanking strategies have failed to cope with weak demand and prevent rates from falling.
Despite the reduction in shipping capacity caused by the suspension of sailings, the shipping market is still expected to move towards overcapacity in 2023 due to new ship orders and weak global demand during the epidemic.