The US-Western United States plummeted, freight rates ended ten consecutive rises, and the effect of early shipments from the United States diminished
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After rising for more than two consecutive months, the container shipping market has experienced its first significant correction.
On July 10, the Shanghai Export Container Freight Index ended the ten consecutive weeks of rising trends and reported at 3184.83 points, down 142.04 points from last week and a weekly decrease of 4.27%. Freight rates on the four major routes weakened simultaneously. The US-Western route experienced the most significant decline, with some market quotations falling by approximately US,000 per week; the US-Eastern route, Europe and other routes also experienced varying degrees of decline.
It is generally believed in the industry that as U.S. importers’ demand for advance stocking is gradually released and new shipping capacity continues to be added, the market has begun to enter a phased adjustment cycle.
The US-Western route dropped significantly, and spot quotations fell rapidly.
Judging from market quotations, the US-Western route has become the leading decliner in this round of adjustment. According to feedback from multiple freight forwarders, due to the impact of new routes and overtime ships being put into the market, the supply of shipping capacity in the US-West direction continues to increase, and market competition has intensified. Starting next week, the spot quotation of 40-foot containers is expected to be reduced by about US,000. Previously, the quotation price for the US-Western route rose to approximately US,500/FEU at the beginning of this month. The current market quotation has fallen back to the range of US,400 to US,600/FEU.
In contrast, the adjustment of the US East route is relatively mild. It is expected to be reduced by about US0 next week. The current quotation is about US,850 to US,950/FEU, which remains relatively high. European routes have also experienced corrections. At the beginning of this month, some shipping companies quoted prices of about US,500. Now they have dropped to the range of US,800 to US,200. The price differences between different shipping companies are obvious.
The effect of advance stocking is weakening, and the increase in transportation capacity promotes cooling of the market
Industry analysts pointed out that this round of freight rate correction is mainly driven by two factors. On the one hand, U.S. importers have previously concentrated on stocking up in advance to avoid trade policy and supply chain uncertainties, which has led to periodic demand peaks. As this part of the cargo volume is gradually digested and new orders return to normal, the effect of starting the peak season early is weakening. On the other hand, newly added routes, overtime ships and some detour shipping capacity have recently returned to the market. The supply of effective transport capacity continues to increase, and the relationship between supply and demand tends to ease, pushing the freight rates of major routes to correct.
However, we are still in the early stages of the traditional peak season in the third quarter. The subsequent back-to-school season in Europe and the United States, year-end holiday stocking needs, and shipping company capacity control measures will still have an important impact on market trends.
Shipping companies suspend price increases, and the ratio of long-term contracts and spot goods is readjusted
Many large freight forwarders said that the new round of price increases expected by the market in mid-July will most likely not be implemented, and there is still room for further correction in freight rates in the short term. Currently, the overall capacity of major routes is not tight, and the loading rate of the US West Route is about 80%; the US East Route is affected by the draft restrictions of the Panama Canal, and ships generally operate with reduced load, and the loading rate after load reduction is about 95%.
As spot freight rates in the West Coast have fallen rapidly, some shipping companies have adjusted the ratio of long-term contracts and spot cargo space. During the period when spot prices continued to rise, many shipping companies adopted a 1:1 ratio between long-term contracts and spot cargo. As spot freight prices have fallen, some shipping companies have returned to a 2:1 ratio starting next week, that is, two spot cargo slots correspond to one long-term contract slot. Some companies have also adjusted to a 3:2 ratio.
Industry insiders pointed out that although freight rates have corrected, the current overall price is still higher than the operating costs of most shipping companies, and there is still room for further downward pressure in the market in the future. Whether freight rates can stabilize in the future still needs to be paid attention to the intensity of shipping companies' cabin control, changes in cargo volume and the pace of demand release in traditional peak seasons.
