7.8 C
Hamburg
Saturday, May 24, 2025
Home Most Popular Rate reduction could take 18-30 months, reports Sea-Intelligence

Rate reduction could take 18-30 months, reports Sea-Intelligence

The Danish provider of research & analysis, data and advisory services within the global supply chain industry, Sea-Intelligence has analysed the composite China Containerized Freight Index (CCFI) to see how quickly freight rates could normalise, if using history as a guide.

In the following figure, Sea-Intelligence narrowed down the CCFI to the pre-pandemic data, and identified five periods of sustained rate decreases (marked in red), as well as five periods of sustained rate increases (marked in green).

Source: Sea-Intelligence.com, Sunday Spotlight, issue 540

Based on this, Sea-Intelligence analysts defined the time periods of increases and decreases and analysed each separately.

“We measured the rate of decline in terms of the average percentage point drop per week, over the full period of each of the 5 decline periods. This ranged between -0.4% and -0.9% per week. If these time periods are to reflect the inherent pricing mechanisms in the industry, we can use them to calculate a reversal back to normality,” explains Alan Murphy, CEO of Sea-Intelligence.

This, however, presents the next question: what is a normal rate level? Based on historical CCFI data, this is represented by rate levels around index level 1000.

“This represents a decline of -69% from the current rate level,” pointed out Sea-Intelligence.

During the global financial crisis of 2008-2009, rates declined at the fastest rate of a weekly decline of -0.9%, and if we apply this speed of decline to the current rate levels, it would take 18 months to get back to “normal”, according to the analysis.

If, however, the rate of decline matches the average seen over the five rate decline periods, then normalisation would take as much as 26 months. However, it can be argued that the current increase is much stronger than before, and that should be accounted for.

“To do this, we calculated the average weekly rate increases for the five periods with rate increases,” said Murphy.

On average, over the five periods of decline, the rates dropped -0.6 percentage points per week, on average, while over the five periods of increase, we saw rates go up by 1.1 percentage points over the period.

This implies a factor of 1.8 between increases and decreases, meaning that rate increases tend to be 80% stronger, on a weekly basis, than decreases. As the current rate level comes after a 17-month period of sustained rate increases, the result becomes 30 months before a reversal back to index 1000.





Antonis Karamalegkos
Managing Editor

Latest Posts

Shipping surge or strategic stall? Industry braces for July 9 tariff truce deadline

As the clock ticks down toward July 9, the expiration date of the current US-China tariff truce, the global shipping industry is caught in...

Brazil approves MSC’s Acquisition of Wilson Sons, paving the way for $1.35 billion deal

Brazilian regulators have given the green light to MSC’s planned acquisition of Wilson Sons, clearing the final regulatory hurdle and setting the stage for...

Port of Los Angeles expands investment in zero-emissions trucking through 2028

The Port of Los Angeles has announced a continued commitment to advancing clean transportation, with a three-year plan to accelerate the transition of its...

Saga Shipholding transfers entire fleet to the Bahamas ship registry

The Bahamas Maritime Authority announceδ that Saga Shipholding, in partnership with NYK and under the management of global leader Anglo-Eastern, has committed to transferring...

Rhenus Group opens logistics hub in Venlo

The Rhenus Group proudly announces the official opening of its cutting-edge logistics hub in Venlo. This newly launched facility significantly enhances Rhenus Road’s European logistics...
error: Content is protected !!