HSBC: Spot container freight rates on a ‘likely recovery path’

A container ship at port (Photo: BBC)

In its Global Freight Monitor report, HSBC surprisingly noted that the Shanghai Containerized Freight Index (SCFI) was up 8% from the previous week and up 14% from its recent bottom. However, SCFI is still down 7% from the level at the beginning of 2023.

Even so, this appears to mark a shift after a more than year-long slump in spot container rates that saw rates fall 84% from their record high of $10,377/FEU in September 2021 as reported by Drewry's World Container Index (WCI). Last Thursday, the WCI was mostly unchanged at $1,709 per FEU.

HSBC commented: “In fact, we have noticed that the decline in market freight rates has been tapering since December as they have already come close to market breakeven levels. We expect market spot rates to stabilise at current levels in the coming months and gain support from a sequential improvement in volumes in 2H23.”

The report notes that the Clarksons Time Charter Index for container ships has also recovered 13% from its mid-February low. This is another sign that spot rates are not only stable but also on a “likely recovery path”.

In another positive sign, China's exports also increased by 15% year-on-year in March, reversing five consecutive months of decline.

HSBC believes the continued threat of labor disruption at the US West Coast ports of Los Angeles and Long Beach as negotiations with unions drag on on the issue could also be beneficial. to the container shipping lines in their negotiations on the contract price. “We argue that this will likely further encourage beneficial cargo owners to sign contracts above spot rates to ensure service reliability.”

Looking further ahead, however, HSBC sees potential downside risks in 2024 with the dissolution of the 2M Alliance, officially from early 2025, which could lead to stiffer competition in the meantime.

Read more:

• Drewry: The world container freight rate index stable

Source: Phaata.com (According to SeatradeMaritimes)

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