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According to Vespucci Maritime CEO Lars Jensen in the latest Baltic Exchange report, as spot container freight rates appear to have peaked, contract rates are also expected to increase to reflect shipping costs. around the Cape of Good Hope increased.

On February 2, the Shanghai Container Freight Index (SCFI) showed that for the third consecutive week, there were downward freight rate adjustments for the Shanghai-Northern Europe and Shanghai-Mediterranean routes, routes most affected by the Red Sea crisis.

Shanghai-North Europe rates decreased 5% from last week to 2,723 USD/TEU, while Shanghai-Mediterranean rates were adjusted down 4%, to 3,753 USD/TEU.

Jensen suggests that European importers may have learned a lesson from the logistics bottlenecks that pushed up freight rates during the Covid-19 pandemic, as many underestimated the pressure we seen for capacity due to service disruptions.

“This time around, it might be a little different. We have already hit the peak of disruptive impact. Vessels that needed extra-long detours to go around Africa have now completed those journeys. The empty container shortfall that could be expected in China likely reached an apex in terms of magnitude already in mid-January. As such, the momentum for rates to spike even further on account of fear of worse to come has waned", he wrote.

“The other element to keep in mind is that we are in the last week of usual peak run-up to Chinese New Year. Seasonally, rates are supposed to go up and hence the positive momentum on the Pacific comes to some degree from this. In that context it is more remarkable that the Asia-Europe rates are already flatlining – in itself another indication that the disruption of capacity is not as severe as feared.”

Jensen said rates would not fall to the lowest levels seen before the Red Sea crisis caused 90% of ships on the Asia-Europe trade to divert to the Cape of Good Hope. Therefore, shipping lines have the ability to take advantage by increasing contract prices.

“There will be an upwards momentum on new contract rates as these now also need to reflect both the added cost of round-Africa services as well as the sudden strengthening of the supply/demand balance in favour of the carriers.”

However, transpacific rates are still rising. On February 2, Shanghai-US West Coast rates increased 13% to $5,005/FEU, while Shanghai-US East Coast rates increased 4% to $6,652/FEU.

“The disruptions hit a much smaller amount of the total US imports, and an obvious way to circumvent the problem is to re-route cargo to US West Coast (the faster route) – in turn acting as a push upwards for rates there," he explained.

 

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Source: Phaata.com (According to ContainerNews) 

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