Down 15 weeks in a row! Freight rates in October is expected to stop falling or even rise?

Down 15 weeks in a row! Freight rates in October is expected to stop falling or even rise?

Factors such as global inflation, aggressive interest rate hikes in the United States and the war between Russia and Ukraine continue to impact the purchasing power of consumers in Europe and the United States. Container shipping rates have fallen for 15 consecutive weeks.

According to the data released by the Shanghai HNA Stock Exchange on September 23, the latest Shanghai Export container Freight Index (SCFI) fell 240.61 points to 2072.04 points, a weekly decline of 10.40%, falling for 15 weeks in a row, from the beginning of the year's all-time high of 5109 points down nearly 60%, most of the major routes fell more than 10%, On the American West, it fell below $3,000.

Last week, the FEU rate on the Western route fell $366, or 12%, to $2,684, and is down more than two-thirds from its all-time high of $7,900 at the start of the year. The FEU on the American Eastern Route dropped $638 to $6,538 and lost the $7,000 level, a weekly decline of 8.9% and a cumulative decline of 45% since the high of the year.

At the same time, due to the impact of the Russia-Ukraine war escalation, the European line, the Mediterranean line freight rates are weak. Last week, the price per TEU on the European line fell $382, or 10.78%, to $3,163 and was revised down nearly 60% from its all-time high at the start of the year. The Mediterranean Line fell $528, or 13.98 per cent, to $3,249 per TEU.

The South American line (Santos) fell $863, or 13.61 per cent, to $5,479 per TEU. The Southeast Asia Line (Singapore) was $386 per TEU, down $17 or 4.22 per cent for the week.

It is known that recently, the continuous decline of freight rates is mainly due to the epidemic, China's port lockdown, inflation, terminal destocking and other reasons, which have weakened the demand for shipping space. However, under the condition of stable supply, the supply of shipping space has shown an oversupply, which not only leads to the weakness of spot freight rates, but also puts pressure on long-term freight rates.

Industry insiders are concerned that the US decision to raise interest rates in order to curb inflation, and the central banks of many countries following suit, may lead to an economic recession, will have a negative impact on the global freight market. Container ships mainly carry consumer goods for people's livelihood. This round of inflation caused by energy and food has weakened consumer purchasing power, thus reducing the demand for container transportation. In addition, consumers will spend more on non-containerized food and fuel, which will push out traditional container goods such as clothing, furniture and electronics.

At present, inflation in the United States seriously crowding out commodity consumption, and the impact of the war between Russia and Ukraine in Europe are the reasons for the weak freight rates of the European and American lines. In October, the three major shipping alliances will continue to reduce cabin class in order to stabilize freight rates. It is said that the southwest coast routes of the United States will be reduced by about half of the flights.

In spite of this, industry analysis believes that with the US interest rate hike, most Asian currencies fell sharply, combined with the deep drop in freight rates, which is conducive to accelerating the improvement of inflation in the US, but also conducive to win export orders, coupled with the shipping alliance significantly reduce shifts, it is estimated that the third week of October cargo volume will see growth, freight rates are expected to stop falling or even pick up.