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© Nahid Hasan Masud
By Charlie Bartlett technology editor, The Loadstar
18/10/2024
Freight rates are continuing their downward correction following the premature peak season and front-loading of volumes, leaving shipping lines facing an underwhelming winter.
The Drewry World Container Index (WCI) this week continued its drastic downward trajectory, established in July, reaching $3,216 per feu, demonstrating that Cape of Good Hope transits are now a matter of routine. New tonnage is constantly hitting the water and the decision of whether port workers on the US east coast will strike again is delayed until January.
Following this 4% decrease, should rates continue their plunge, they will soon pass the $2,706 per feu threshold set in May, when chaotic trading patterns, brought on by adjustment to Cape sailing schedules, settled into a more mundane groove.
WCI’s Shanghai-Genoa showed the most pronounced drop, of 9%, this week, followed by Shanghai-Rotterdam, which fell 6%.
Drewry notes that the combined index is still some 126% above the pre-pandemic, 2019, average of $1,420. According to its modelling for 2025 and beyond, unveiled yesterday, this is likely to remain the case, with head of supply chain advisors Phillip Damas pointing to rates remaining above pre-pandemic levels even if there are no US port strikes in January.
Meanwhile, data from Linerlytica today suggests the vessel congestion on the US east coast, evident this time last week, has all but cleared. The group asserted that the advance of peak season, in expectation of strikes, was now in “reverse” and leaving a major hole in demand, just as new tonnage is still deluging the market – adding that carriers have missed their chance to address the issue.
“Carriers have still not adjusted vessel capacity for the winter season, with only limited blank sailings planned in the next six weeks,” Linerlytica said on Monday. “This is clearly seen in the Asia-North Europe, US west coast and Latin America routes, where capacity deployment remains elevated, while the containership charter market also remains red hot.
“Apart from selective void sailings, none of the carriers on the Asia-Europe route are planning any winter capacity reductions. This would jeopardise their efforts to arrest the decline in freight rates, despite plans to hike rates by $1,000-2,000 per feu on 1 November, after the SCFIS have already slipped by 62% since July.”