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Freight rates continue to fall , are they expected to return to normal levels?

Time:2022-05-06 Publisher:Kevin Num:3657

According to the latest data of Shanghai shipping exchange, the freight rate index of export containers in Shanghai continued to fall by 32.67 points to 4195.98 points compared with last week, showing a decline for 14 consecutive weeks. At present, the freight rate index has fallen back to the level before August last year.

Year to date, the world container index (WCI) from Drewry, a shipping consulting company, has fallen below $8000 per 40 foot container (feu), down 0.9% month on month, falling back to the freight rate level in June last year.

Since the beginning of the year, taking the route from Shanghai to Los Angeles as an example, the index has fallen by nearly 17%, mainly after March 10, down about 13%.

According to Drewry's calculation, among the eight routes affecting the world container freight rate index, the three routes from Shanghai to Rotterdam, New York and Los Angeles account for nearly 60%.

China's export container volume plummeted

In addition to the drop in freight rates, China's container exports also began to decline due to the impact of the epidemic.

Affected by the epidemic and other factors, Shenzhen's exports fell in the first quarter of 2022. According to the data released by Shenzhen customs, in the first quarter of 2022, the export of Shenzhen was 407.66 billion yuan, a year-on-year decrease of 2.6%, of which the export in March was about 120 billion yuan, a year-on-year decrease of 14%.

According to sonar data, at present, the container export volume of Chinese ports has decreased by more than 31%. As the volume of goods transported by trucks entering the United States decreases, this slowdown in freight volume will also affect the U.S. land transportation market.

Port freight rates in the United States also plummeted

According to Container x Change, an analysis company, the challenges facing the container industry are very serious. The number of empty containers at the terminal seems to put pressure on the port freight rates on the west coast and east coast of the United States.

The company said that the overall container freight rate in the United States has fallen by about 25% in the past two months. Compared with the freight rate level in 2021, the price of some ports has fallen a lot.

The assessment shows that with the continuous accumulation of a large number of empty containers, sea freight may fall further.

Christian roeloffs, CEO of Container x Change, said: "due to the impact of the epidemic in the past two years, a large number of containers cannot be transported back to Asia, so empty containers are piled up like a mountain."

"We may see container prices continue to decline as warehouses are full of containers. Carriers and other container owners will be eager to get rid of these boxes," he said.

As more and more containers have to be stored in the limited space of the terminal, container prices will face downward pressure in the short and medium term.

For a long time, due to the large demand caused by the covid-19 pandemic and the global bottleneck and container shortage, freight rates have soared all the way. 

Even if the freight rates have been falling since the first week of the year, they are still nearly 50% higher than the same period last year, which also induces shipping companies to continuously invest in the market.

The transport capacity deployed by European and American routes has increased significantly, but due to the epidemic and inflation, the shipping space is far more than the goods, the container market "oversupply", and the freight rate has fallen all the way.

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