Nearly $2,000! Freight costs rarely drop!

Recently, the container shipping market trend has taken a sharp turn!

The Asia-Europe route is particularly significant, but the trans-Pacific route is not optimistic either. Faced with weak demand, shipping companies aggressively canceled sailings before Asia's Golden Week in response to plummeting freight rates. Container freight has entered the off-season, and the decline has further expanded.

On September 12, the Drewry World Container Index (WCI) composite index fell, with a week-on-week decline of 13%, falling to US$4,168 per 40-foot container.

Among them, the freight rates of routes from Asia to Northern Europe and the Mediterranean region fell by 14% and 12% respectively, and the freight rates of trans-Pacific routes fell by 15%, of which Shanghai-New York dropped by 21% to US$6,661/FEU.

Drewry said that due to concerns about the potential impact of the International Longshoremen's Association (ILA) strike in October, shippers are shifting cargo from the East Coast of the United States to the West Coast, resulting in a decline in demand in the East Coast. This has led to a sharp drop of 21% in spot freight rates in the East Coast of the United States. Due to weak demand, the agency expects that east-west freight rates will fall further in the coming weeks.

However, the reasons for this sharp drop in freight prices are complex and diverse.

>>>> Port strikes, supply chain instability

Recently, industry experts pointed out that in order to maintain stable freight rates, container shipping companies have taken measures to suspend sailings before China’s National Day Golden Week. Specifically, in the five weeks from early September to early October, the number of flights on major trade routes from Asia to Europe and the United States was significantly reduced.

Especially for the US East route, freight rates have declined due to multiple factors. On the one hand, potential strikes on the Canadian railway system and possible strikes by port workers on the eastern and Gulf coasts of the United States in early October have made customers take a wait-and-see attitude and are unwilling to place orders easily; on the other hand, some cargo owners who are in urgent need of shipments are trying to To avoid risks, choose to switch to the West American route.

In addition, the improvement of navigation conditions in the Panama Canal has also led to more ships choosing to pass through the canal, further exacerbating the downward trend in freight rates on the US East Line.

Given that the outcome of the ILA negotiations at the US East Coast terminals is still unclear, it is expected that the volume of cargo in the US East Coast may decrease in the coming weeks, further dragging down freight rates. However, if the cargo flow shifts to the US West Coast, it may slow down the decline in US West Coast freight rates, and even show signs of stabilization in the coming weeks.

In addition, the slowdown or strike of dock workers will have a profound impact on the supply and demand relationship in the container shipping market. Coupled with the supply chain impact of the Red Sea crisis, once the strike lasts for two weeks, it will take at least two to three months for the terminal operations to resume, and its impact will affect the entire shipping network, including ship schedules and all terminals.

In particular, if the US East Coast dock workers' union starts a strike on October 1, a large amount of cargo will flow to the US West Coast, the cargo will surge, and the time to process the cargo will be extended, which may lead to supply chain congestion, which may reverse the trend of freight rates and cause them to rise again.

>>> Weak demand

It is reported that analysts at Linerlytica said that the reduction in freight demand is the direct cause of the decline in freight rates, and in order to cope with this situation, carriers have to offer discounts to attract shippers.

Special prices are offered for some voyages. In terms of spot prices, Maersk opened the trial cabin in week 39 in advance, with a reference price of 2600/4400/4400 from Shanghai to Feili. MSC lowered its online price in late September to 2930/4890. YML lowered its offline price in late September to 2650/4650.

>>>> Peak season ahead of time

In addition, due to a general decline in east-west spot freight rates (except for the westbound transatlantic route) and sluggish demand for export cargoes on the eve of China’s Golden Week, the booking peak before factory shutdowns this year was significantly lower than in previous years. This year's peak shipping season has started early, which may lead to an early reduction in China's export cargo flow.

In order to cope with the impact of the holidays on demand and labor supply, shipping companies are taking blank sailing measures to appropriately adjust capacity. In order to cope with this situation, it is expected that in the next five weeks from September 9 to October 13, 2024, the OCEAN Alliance, THE Alliance and 2M Alliance will cancel 20, 24 and 14 events respectively, and 31 events will be canceled outside the alliance.

It is foreseeable that in the coming period, although the container shipping market will face challenges, changes in market supply and demand, geopolitics, shipping company policies, etc. will still affect the trend of freight rates.