Rates on the two major trades to Europe and the United States continued to slide even as workers begin their slow return to factories in China following the Golden Week holidays.
Last week’s shutdown of production in China included the Shanghai Container Freight Index (SCFI) which will resume publishing its rates this week with the headhaul Pacific rates already US$200/FEU below the last SCFI value.
Spot freight rates to Europe were set at a pre-Golden Week level of US$1,166/FEU but are now said to have crashed to under US$800/FEU.
Carriers have announced rate rises on both major trades, US$1,000/FEU on 15 October and 1 November on the Pacific and an increase of up to US$1,800/FEU on the European trades according to the Hong Kong-based consultancy, Linerlytica.
These proposed rate increases with Linerlytica confirming, “There remains very little conviction that the higher rates will hold in the absence of any capacity adjustments.”
In addition, the consultant reported, “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.”
Even with the 0.9% of the fleet, 65 ships totalling 243,097 TEU idled, the flood of new ships, totalling 23 ships 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.
A collapse in demand has seen an increase in the number of available spot vessels for charter according to shipbroker Braemar, who reports, “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 adds that to sustain freight markets in the period from now to 2025 there is an expectation for a substantial increase in demolitions. The broker believes that the cascading of ships, will put vessels in the mid-sized range under pressure, ships of 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 a 62.7% decline in long-term freight rates over the last year, with a 7.8% decline in contract rates in August alone.
Xenata added, “Routes from the Far East, the busiest globally, experienced a significant 75% year-on-year contract value reduction based on Xeneta’s regional sub-index.”
Mary Ann Evans
Correspondent at Large
