CONTAINER spot freight rates continued their slide last week, with the Shanghai Containerised Freight Index losing another 9.5% as key main lane trades continued to weigh down the index.
The most substantial fall was on the Asia-Europe trade, which saw rates fall by over one fifth to reach $1,172 per teu, but all bar one of the trades recorded by the Shanghai Shipping Exchange was in negative territory.
Asia-Europe rates are still higher than the 2019 average of $754 per teu, but the same cannot be said for the transpacific US west coast trade.
Rates there fell another 4.5% last week to $1,559 per feu, driven partially by the continued threat of industrial action that has seen shippers opting for the US east and Gulf coasts instead. But this now puts rates at the same level as the 2019 average of $1,526 per feu.
“On the FE-US West Coast, rates have already dropped below their pre-pandemic levels with current spot rates reminiscent of the period leading to the bankruptcy of Hanjin Shipping in August 2016,” Linerlytica said.
Another cause for the fall in rates was that effective capacity has risen to its highest levels since the first half of 2021 due to easing congestion and the quicker pace of newbuilding deliveries, it added.
“The two factors will continue to push up overall vessel supply in the months ahead. Freight rates are expected to remain depressed in the coming months while several carriers continue to ramp up their operated capacity with a clear unwillingness to curb their market share growth ambitions.”
In an analysis of the less volatile China Containerised Freight Index, which includes contract rates, Sea-Intelligence chief executive Alan Murphy pointed out that on a number of trades, rates had fallen by as much as 90% from their peaks when compared to 2019 levels.
“Trades which experienced extremely large rate increases during the pandemic, are also the trades now exhibiting the fastest degree of normalisation,” he said.
In the US, however, this might also be being influenced by high inventory levels, which were responsible for the sharp drop in imports to the US in September.
The inventory-to-sales ratio was still below pre-pandemic norms but was clearly on a growing trend, Mr Murphy said.
“Inventories for both retailers and wholesalers keep increasing — at a time where sales are stagnating,” he said. “As consumer sentiment continues to plummet, sales are likely to also decline, and with the supply chain still being lagged more than a month longer than usual, we will continue to see an inventory correction unfold.”
While attention has been focussed on the collapse in head haul rates, figures from Xeneta show that a number of backhaul trades have seen equally large falls, with some trades seeing spot rates falling for longer than on the front haul and now below January 2020 levels.
From Europe to Asia, the average rate for a standard dry container has fallen to $820 per feu.
“This is down by more than $1 000 per feu (56%) from its peak in May 2021, having fallen pretty consistently since then,” Xeneta said. “Compared to January 2020, the spot rate on November 14 was lower, down by 6.8%. Though a small saving, it is one of the first trades to have crossed this milestone. Now that the tables have turned and carriers are scrambling for all the volumes they can get, backhaul shippers are having an easier time getting their volumes on board as prices fall.”