Container shipping rates are peaking

There are indications that container freight rates are decreasing due to lower demand, as the supply of ships and containers is being restocked.

The Load Star reported that further confirmation has emerged in the container port freight market this week indicating that ocean container freight rates have reached their highest point on several routes.

All three primary indices monitoring shipping rates experienced slight decreases, attributed to a reduction in the volume of ships handling cargo in Asia.

The most significant drop was observed on the trans-Pacific route from Asia to North America, with Drewry’s world container freight index (WCI) from Shanghai to Los Angeles falling by 5% last week to 6,934 USD/FEU (40 ft container).

 

 World container freight index (WCI) developments (Source: Drewry)

 

The XSI index monitoring contract rates from freight consultancy Xeneta dropped by 6% to 7,322 USD/FEU.

On the other hand, the FBX index from the booking and payment platform Freightos for international shipping services decreased by 4% to 7,738 USD/FEU.

In the meantime, prices on the Asia-North Europe route remained stable or slightly decreased. WCI and XSI stayed steady at $8,260 and $8,474/FEU, respectively.

Sources in Asia-Europe freight forwarding have confirmed that booking has become more accessible in the last two weeks. This indicates that demand is starting to ease or that the significant capacity additions since the beginning of the year are beginning to have an impact.

“It has definitely become easier to secure space in the last two weeks, although we still need to adhere to the allocation and any excess must be transferred,” stated a delivery company in reference to spot price/FAK.

Spot rates on WCI’s Shanghai-Genoa service dropped by 1% to end at $7,645/FEU, while rates on FBX’s Asia-Mediterranean trade fell by 3% from the previous week, reaching 7,508 USD/FEU.

 Container shipping rates from Shanghai to Europe and the US (Source: Drewry)

 

According to the latest data provided by Alphaliner, all major carriers, except for Yang Ming, have experienced an increase in capacity during the first half of this year. MSC stands out as the leader in this aspect, having incorporated around 400,000 TEUs into its fleet since the beginning of the year. Presently, the total shipping capacity of MSC’s fleet exceeds 6 million TEU.

Furthermore, both MSC and CMA CGM have placed orders for approximately 1.2 million TEUs of capacity for this year and the next. Alphaliner has indicated that it is highly probable that the French carrier will surpass Maersk to become the second-largest carrier in the next two to three years.

On a different note, the decline in spot freight rates has put an end to more than three months of consecutive increases, impacting the charter market. The shipbrokers association Hamburg and Bremen (VHBS) highlighted this week that shipping lines are becoming more cautious in their negotiations with shipowners.

VHBS Director Alexander Geisler stated, “This caution is justified, considering the decline in spot freight rates; the Shanghai Container Export Freight Index (SCFI) experienced its second consecutive weekly drop last Friday, following 13 weeks of uninterrupted increases.” 

He further noted that the ongoing rise in new shipbuilding capacity is gradually undermining the market’s previously robust foundation. A decrease in freight demand, which may occur sooner than anticipated this year, will challenge the market’s ability to cope with an influx of new vessels as the peak season commences. 

With over 1.3 million TEU of new ships scheduled for delivery by the end of this year and an additional 2 million TEU expected by 2025, ship owners and operators may face significant challenges ahead.

 

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