Freight rates on the spot market in container shipping are plummeting. The result: insufficient capacity utilization rates and high pressure on prices.
Cargo volumes appear to be picking up more slowly than expected after the Chinese New Year, but carriers have nevertheless ramped up their capacities considerably.
The Shanghai Containerized Freight Index (SCFI), which tracks the average spot rates in 13 trade lanes out of China, fell surprisingly sharply today by -8% to 1,319 points. The rate level is now a good 25% lower than at the same time a year ago.
Even warnings by the Houthi rebels in Yemen of renewed attacks on merchant shipping in the Red Sea do not appear to have had a lasting effect on sentiment on the freight market. The major lines have been avoiding the sea area for over a year anyway.
The main routes from Shanghai to North America and Europe again saw the sharpest price falls. According to SCFI, cargo space on the Shanghai/North Europe route fell by -15% to 1,342 $/TEU, while the level for shipments from China’s largest transshipment point to the US West Coast fell by -14% to 1,965 $/FEU.
It is impossible to say for certain whether it is primarily seasonal factors that are slowing demand or whether the punitive tariffs imposed by the USA and the initial economic knock-on effects are already having a noticeable impact on the freight business. According to the Freightos booking platform, importers in the USA are now becoming more cautious because deliveries that are now being requested in the Far East could be subject to punitive tariffs when they arrive in the USA from April – at any rate, the Trump administration is still threatening a flat-rate tariff of 60% on Chinese goods.
On the Far East-Europe route, the first carriers – including Maersk – want to make an attempt to raise rates again from April. This would require a significant improvement in the capacity utilization of the services. According to recent estimates, departures from the Far East were only just over 90% full.
Bulker demand with a positive trend
The shipping companies in the dry bulk shipping sector can look back on a positive week. Despite the escalating tariffs on steel, aluminum and agricultural products between the USA on the one hand and Europe and China on the other, charter demand is still stable to rising. The Baltic Dry Index rose by 269 points to 1,669, with strong momentum in the Panamax and Capesize segments.
The average capesize rate in the time charter trip business continued to climb by 18% to around USD 23,700/day. Tonnage inquiries have risen noticeably, particularly in Brazil and West Africa, so that charterers are now increasingly putting out feelers to Southeast Asia to secure tonnage, brokers report.
Thanks to rising demand on the east coast of South America (grain) and in Southeast Asia (coal), the Panamaxem improved strongly by +37% to 12,300 $/day. The smaller ship classes with their own cranes were quieter. However, grain shipments from the east coast of South America and increased activity in Australia provided sufficient impetus to push rates up slightly. Yields for the 63,000-tonne Ultramax (11TC) and the 38,000-tonne Handy (7TC) climbed by just under +8% and +3% to 11,752 and 10,298 $/day respectively.
Rate fluctuations on the tanker market were limited. With the exception of individual regions – such as Europe and West Africa in the Suezmax segment – activity did not increase compared to the previous week. VLCCs improved minimally by 3% to 43,700 $/day. Suezmaxes and Aframaxes increased by around +6% and 2% to $41,200 and $27,800/day respectively in the spot business, according to Clarksons. (mph)
