Container freight rates to Europe and US continue to fall after Golden Week in China

Container freight rates to Europe and US continue to fall after Golden Week in China (Photo: Phaata)

Production shutdowns in China last week included the Shanghai Container Freight Index (SCFI), which continued to publish freight rates this week with rates on the Pacific route falling $200/FEU compared to most recent SCFI value.

Spot freight rates to Europe were set before the Golden Week holiday at $1,166/FEU but are now believed to have fallen below $800/FEU.

Shipping lines have announced rate increases on both major routes, by $1,000/FEU on October 15 and November 1 on the trans-Pacific trade and up to $1,800/FEU on the European trade according to the Hong Kong-based consultancy, Linerlytica.

In response to these shipping lines' plans to increase rates, Linerlytica commented, "There remains very little conviction that the higher rates will hold in the absence of any capacity adjustments."

Additionally, the consultant said, “Initial projections for November show capacity increases on the Transpacific and Asia-Europe routes of between 7% to 17% month-on-month, that largely reverses the capacity reductions in October.”

Although 0.9% of the fleet, 65 vessels with a total capacity of 243,097 TEU, were out of service, the wave of new vessels, a total of 23 vessels with a capacity of 151,916 TEU delivered in the last 30 days has largely offset the non-operating fleet, while the scrapped vessels, 10 ships of 16,200 TEU are not enough to move the dial.

According to shipbroker Braemar, the decline in demand has led to an increase in the number of spot vessels available for charter, Braemar said, “With a larger amount of available spot vessels in the market, as well as increasing surplus tonnage being on offer, the overall tone floating around the market is not encouraging and the expectations for the fourth quarter of 2023 are alarming.”

Braemar added that to sustain the shipping market between now and 2025, there needs to be a significant increase in old ship demolitions. The broker believes that this reduction in number of vessels will put pressure on vessels in the mid-range segment, vessels between 4,000 and 7,500 TEU.

“There are 250 vessels in the 4,000-7,500 TEU size bands that are aged over 20 years. Significant fleet management to follow while the supply and demand dynamics remain out of kilter,” said Braemar.

In its August figures, Xenata Freight Index said its data showed long-haul freight rates fell 62.7% over the past year, with contract rates down 7.8% in August alone.

Xenata added, “Routes from the Far East, the busiest globally, experienced a significant contract price decline of 75% year-on-year based on Xenata's regional sub-index.”

Read more:

• International shipping and logistics market update - Week 40/2023
• Transpacific trade hit by changing US consumer behavior

Source: Phaata.com (According to Mary Ann Evans, ContainerNews)

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