Freight rates will fall by 70% in the coming year according to Linerlytica, but Xeneta claim
that for such a decrease to occur it would mean that the Suez Canal has reopened and that
there is massive over-capacity.
Consultancy Linerlytica said today it expects freight rates to fall by 70% over the next 12
months, as carriers have failed to prevent the slide in rates seen since July according to
statistics from the Shanghai Container Freight Index (SCFI).
Container shipping lines have struggled to arrest the rate of deterioration that followed the
July zenith, after what appeared to be an early peak season, as demand wanes, and another 36 ships, of just under 205,000 TEUs, were delivered over the last month.
“Freight futures continue to weaken, with North Europe rates trading at a discount of over
70% to current spot rates,” said Linerlytica.
Long-term contract rates could see the biggest impact on global container shipping
market.
“Container freight rates are poised to fall by over 70% by June next year, based on the latest CoFIF EC contracts traded on the Shanghai International Energy Exchange (INE). Although the drop is not as severe as the freight rate collapse seen at the end of 2022, the current freight futures prices anticipate continuous declines over the coming 12 months, with no rebound expected at the end of this year and no repeat of this year’s post-Chinese New Year rate rally in 2025,” reported Linerlytica.
According to the consultant, shipping lines have failed to maintain spot rate levels with the
SCFIS fell 12% on the North European trades from July, which has seen a steady 1-3%
weekly decline until last week’s 7.3% drop.
The SCFIS, a better measure of actual market spot rates, has been falling since the July highs on the Pacific to the US West Coast. In contrast, the SCFI gave a “false signal of a rate rebound a week ago”, among 38% losses seen since July, said Linerlytica.
SCFIS measures rates for exports from Shanghai four major European ports and three
US West Coast ports whereas the SCFI covers a much wider global range of trades from
Shanghai.
The SCFI has also seen rates deteriorate by 5.6% over the past week on the Pacific and
Middle East trades.
However, Xeneta’s chief analyst Peter Sand believes that a prerequisite for a 70% fall in
contract rates will be a resolution to the Red Sea crisis and a return of vessels trading via the Suez Canal.
“It is probable that rates will find a different level,” conceded Sand, who qualified that by
adding, “But the Red Sea is the one thing that is different from a year ago when rates were
coming down and lines were reporting losses.”
Volumes are up, said Sand, but they are on a par with volumes in 2021 and 2022, “this is not a demand-driven market,” he said.
According to Xeneta, CTS data total volumes, dry and reefer, have increased 6.5% in the first half of 2024 compared to 2019 volumes, from 84.1 million TEUs in H1-2019 to 89.6 million TEUs.
In the same period the fleet has increased “a whopping 30.8%” said Sand, quoting Xeneta,
Clarksons data, to 29.569 million TEUs, by the end of H1-2024 from 22.603 million TEUs in mid-2019.
“As of today: the longer sailing distances due to the Red Sea disruption make all the
difference. From massive overcapacity to a tight market. Xeneta estimates that TEU miles in the first four months of 2024 are up by 18.3% year-on-year, virtually closing the gap
between demand and supply – as is clear from the current high contract and spot freight
rate levels,” concluded Sand.
Marry Ann Evans
Correspondent at Large
