Container freight rates have shown no signs of stopping their decline. The Shanghai Export Container Freight Index (SCFI) fell below 2,000 points in the last week of September, falling for 16 consecutive weeks.
Freight prices fell for 16 consecutive weeks
The latest SCFI index of the Shanghai Aviation Exchange fell by 149.09 points to 1922.95 points, a weekly decline of 7.2%, and a monthly decline of as high as 39%.
Since September, the SCFI index has fallen sharply week after week, and the four major ocean lines have plummeted across the board. Among them, the American Western Line and the European Line have fallen below the US$3,000 mark, and all cargo volumes in Asia have declined.
The freight rate per FEU from Shanghai to the US West Line fell by US$285 to US$2,399, a weekly decrease of 10.61%, and the decline in September was as high as 53%;
The freight rate per FEU on the US East Line fell by US$379 to US$6,159, a weekly decrease of 5.79%, and a monthly decrease of 30.02%.
The freight rate per TEU on the European line fell by US$213 to US$2,950, a weekly decrease of 6.73%, and a monthly decrease of 33.57%;
The freight rate per TEU on the Mediterranean line fell by US$250 to US$2,999, a weekly decrease of 7.69% and a monthly decrease of 40.08%.
The freight rate per TEU on the Southeast Asia route to Singapore dropped by US$38 to US$348, a weekly decrease of 9.8%.
Analysts in the industry pointed out that global inflation and monetary tightening have led to a sharp freeze in international transportation demand. The downward revision in freight rates was expected, but the decline was larger than market expectations.
The SCFI index has been revised down by 63% from the high point at the beginning of the year, and has now fallen back to the level of the fourth quarter of 2020. The container shipping market has also turned from a seller’s market to a buyer’s market.
European lines start to charge extra shipping fees
Some people in the freight forwarding industry believe that freight rates on the US-Western Line have fallen no further, while freight rates on the European Line have seen explosive cargo loads from many shipping companies, and freight rates have held up.
On the European line, strikes occurred one after another at Felixstowe and Liverpool, the two major ports in the UK, causing port congestion at important ports in Europe such as Rotterdam and Hamburg.
Many ships in Europe are unable to return to Asia due to port congestion. The original weekly sailing schedule is now only 2 to 3 sailings a month to Asia. Some shipping companies have increased prices to sell space.
Before the National Day holiday, some shipping companies proposed a freight rate of less than US$5,000 per FEU in order to reserve cargo for the first half of October. However, they found that due to reduced schedules and port congestion, some shipping lines had begun to burst into capacity. The quoted freight rates Therefore, an additional shipping fee of US$300-500 was added.
Currently, the Port of Felixstowe is engaged in the second round of strikes, which just ended on October 5. The Port of Liverpool, which has just ended its two-week strike, announced that it will conduct a second round of strikes from October 11th to 17th.
The two major ports account for about 60% of the UK’s container imports, causing the waiting time at Rotterdam and Hamburg as alternative ports to be extended from 7 days to 12-14 days.
Most of the industry believes that Europe and the United States have been digesting inventories for a long time, and coupled with the depreciation of Asian currencies, cargo volume on the European and American lines is expected to pick up in the second half of October. Although the growth rate is not expected to be high, it will help market freight rates stabilize or even recover slightly. , whether the fourth quarter can maintain its off-season performance will probably be revealed a week after the National Day holiday.
Despite this, there are still pessimistic industry insiders who point out that global high inflation and monetary tightening have led to a sharp freeze in international transportation demand, causing freight prices to continue to fall. The world is filled with pessimism about market economic trends. It is expected that containers in the fourth quarter Orders will continue to be impacted and freight rates will continue to fall.
European routes will suspend flights in large areas and reduce flights
Shipping lines are preparing to implement the most severe cuts to liner services since the outbreak of the pandemic as demand levels on global trade routes plummet.
In order to stabilize freight rates, shipping companies are currently self-rescuing in two ways. They have adopted a “three reduction policy” of significantly reducing shifts, reducing cabins, and slowing down. There are already large shipping alliances that have taken out ships on their own, and the number of ships on the West Coast line has been reduced from 1 per week. It operates one shift every two weeks; internally, it implements “red letter management”, preferring to cut prices to grab goods and carry goods without losing money as the bottom line, so as to maintain market share and customer relationships.
In fact, according to foreign industry media, following the recent suspension and reduction of flights on trans-Pacific routes, the three major alliances are considering suspending or merging some Asia-North Europe loop services to alleviate the impact of the sharp decline in bookings and slow down the erosion of the sharp decline in freight rates. .
At the same time, Drewry, an international shipping research and consulting organization, said that the liner shipping industry is entering a “critical period of controlled decline” that will ultimately determine the fate of ocean carriers.
“What shipping companies do next will largely determine how much they gain from the supercycle,” the company said in its latest Container Insight.
At the same time, the report warned: “Failure in this regard will mean that the industry will be destined to return to the low profit margin trend before the epidemic.”
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