Container freight rates increased slowly as Lunar New Year approaches

According to Linerlytica, freight rate increases have "peaked" and shipping lines are now looking beyond the pre-Lunar New Year order price increase to the post-festival taper, following the Shanghai Containerized Freight Index (SCFI) increased 126% since the end of November 2023.

However, Linerlytica's view is that "Despite a widely expected correction, freight rates are still expected to retain most of its recent gains after the Chinese holidays as the shortage of both vessel capacity and container equipment would still persist” is not agreed upon by all analysts.

Simon Heaney at Drewry Shipping Consultants said that although freight rates were still rising, they were at a much slower rate while demand for vessel capacity was also falling.

“Uncertainty around the pre-Chinese New Year cargo rush led to a big spike in rates. There was no visibility on how much capacity was available and that caused some panic", Heaney explained.

However, as realignment of services has been implemented and the first diverted vessels begin arriving in Europe, expect rates to level off, especially after the Chinese holiday, in the second half February as demand is also expected to decline.

“Round voyage costs for vessels transiting the cape are only about 3% higher [if ships travel at the same speed], but carriers say it is difficult to itemise other costs on the longer voyage,” said Heaney. 

Overall, the Red Sea crisis is a "blip" rather than a full-blown pandemic in which global supply chains are under attack.

HSBC analysts said container shipping had been hit hardest by diversions around the Cape of Good Hope, leading to a weekly spike in SCFI up 16.3% last week, but this week This index had a moderate increase of more than 1.5%. by comparison.

Even so, SCFI remains at its highest level since September 2022.

“There are still no signs of tensions easing in the Red Sea, with at least three more commercial ships targeted in the past few days. While container shipping has been the most impacted so far, increasingly dry bulk and tanker companies are halting sailings, especially product tankers, for which we saw a 46% drop in transits via the Suez Canal compared to mid-December,” HSBC said.

HSBC expects delays at European ports as “bunching” occurs, with ships waiting to dock at Northern European terminals as diverted ships begin arriving from Asia.

However, Linerlytica's post-Chinese New Year forecast predicts, “Despite a widely expected correction, freight rates are still expected to retain most of its recent gains after the Chinese holidays as the shortage of both vessel capacity and container equipment would still persist.”

"Anecdotal feedback suggests that space will be less of a problem for February bookings," Heaney said, adding that returning containers to China is also not a major event as Chinese container manufacturers are ramping up production.

Read more:

• International shipping and logistics market update - Week 03/2024
• Red Sea Crisis: Second Largest Capacity Drop Since the Ever Given Grounding
• Red Sea-Suez Crisis: Shipping Rates from Asia to Northern Europe and Mediterranean Quadruple
• Asia - Europe spot container freight rates increased more than 100% due to Red Sea terrorism

Source: Phaata.com (According to Seatrade Maritimes) 

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