The four major bearish factors in the container market have hit the top, causing ocean freight to drop to a cabbage price!
Recently, Peter Sand, Chief Analyst of Xeneta, warned that:At present, the container market is facing four major negative factors, and shipping costs may fall to lower levels than before the epidemic!！
The latest market report data from Drury shows that the World Container Freight Index (WCI) fell sharply again last week, causing the index to fall for more than 200 days, which has halved compared to the same period last year（Fall52%）。。。。。。。 。
The latest freight rate data from the Shanghai Airlines Exchange also shows that the cliff like decline in freight rates on major global routes is still ongoing：
North American routes:
US West Coast freight rates fell from $3484 last week to $3050/FEU, with a weekly drop of $434 or 12.5%
The East Coast freight rate dropped sharply from $7767 to $7176/FEU last week, a decrease of $591 or 7.6%
European routes:
The basic port freight rate in Europe is $3545/TEU, down $332 for the week, a decrease of 8.6%
The Mediterranean route freight rate is $3777/TEU, down $445 for the week, a decrease of 10.5%
Persian Gulf Route：The freight rate is $1232/TEU, down $249 per week, a decrease of 16.8%
Australia New Zealand route：The freight rate is $2262/TEU, down $227 for the week, a decrease of 9.1%
South America Shipping Line：Freight rate of $6342/TEU, down $841 per week, a decrease of 11.7%
Peter Sand, Chief Analyst of Xeneta, warns that freight rates may fall even lower than before the pandemic, and the decline in the shipping industry may make a comeback. Peter Sand issued this warning mainly because the market is currently facing the following four crises:
The port is no longer congested, and currently the problem of port congestion is gradually easing
Nowadays, due to the easing of the shortage of workers in the harbor and the decrease in demand for furniture and other products shipped to the United States, the number of congested ships has significantly decreased. Currently, the number of container ships waiting near the ports of Los Angeles and Long Beach has decreased to less than 10.
Recently, the Port of Los Angeles released its import and export data for August this year. As the country's largest container gateway by throughput, Los Angeles' import volume is declining by double digits (17%). This is the lowest total import volume in Los Angeles since December last year, when imports were suppressed due to severe congestion on the land side. This is also the lowest total import amount for August in Los Angeles since 2014.
A batch of container ship orders are about to be delivered
Shipping giants are vigorously ordering new ships
According to statistical data, the current number of new container ship orders has exceeded 1000, with a total order capacity of over 7 million TEUs, and all of them will be launched in the next two to three years.
Decreased demand and oversupply of market transportation capacity
Affected by global inflation, the economic outlook of Western economies is weak, and consumer demand remains sluggish, resulting in mediocre performance during this year's peak freight season.
A large number of container ships have been put into service
Recently, new ships from multiple shipping companies have flooded the market, increasing the available capacity and making it difficult to find a single cargo in the already sluggish demand and oversupply of container shipping space!
Peter Sand mentioned that at current rates, most shipping companies only need to maintain a capacity utilization rate of 50_60% to make a profit. However, if freight rates continue to decline, capacity management will face serious problems. According to the Nikkei Asian Review, in the past, due to the impact of the pandemic, there was a wave of port congestion in the West Coast of the United States since the end of 2020, and it further worsened last summer. At that time, it took about 30 days to transport goods from Asia to the West Coast of the United States, which was 2-3 times more than usual, leading to skyrocketing shipping costs in the tight global supply chain.
The shipping industry is not thriving during the peak season this year, and ocean freight rates have fallen to the price of cabbage
The third quarter of each year is the traditional peak season for shipping, but against the backdrop of global inflation, economic expectations have weakened and demand has decreased, resulting in a sluggish shipping industry this year.
As an important participant in the maritime market, truck drivers have a deep perception of the market situation. In the past few years, before the Mid Autumn Festival and National Day, due to the rush of shippers to ship goods, long queues to enter the port have repeatedly occurred. However, this year the situation has changed.
Many truck drivers have reported that the market situation is indeed somewhat low. Mr. Wu, who is about to retire, admitted that in his more than 10 years of experience in port container truck transportation, "this year's market situation can be said to be the lightest".
Industry insiders predict that high overseas inflation will squeeze demand, and the downward pressure on the economy will continue to intensify. Compared with last year's sea freight prices of tens of thousands of dollars, the global consolidation market in the fourth quarter is still not optimistic, and there may be a sluggish peak season, with freight rates further falling.
The SHIFEX container spot freight index recorded the lowest freight rates in 24 months between Shanghai, China and Los Angeles, USA. The index shows a shipping cost of $3500/40 ', a year-on-year decrease of 80%.
However, for foreign traders, the crazy freight rates have finally returned to a relatively reasonable position.
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