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Freight Rates Plummet on Europe-Asia Routes
The Shanghai Containerized Freight Index (SCFI) fell below the 3000-point mark again last week, with significant drops particularly on Europe-Asia routes. According to the latest data from the Shanghai Shipping Exchange on August 30, the SCFI index dropped 134.25 points to 2963.38, a 4.33% decrease. Among the four major routes to Europe and the U.S., only the West Coast route saw an increase in rates, while the other three routes continued to decline.
Shanghai Export Container Freight Index.
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Last week, the rates from the Far East to Europe dropped by $524 per TEU to $3876, a 11.91% decrease. Rates from the Far East to the Mediterranean fell by $404 per TEU to $4083, a 9.89% drop. Rates from the Far East to the West Coast of the U.S. increased by $185 per FEU to $6140, a 3.11% rise. Rates from the Far East to the East Coast of the U.S. decreased by $107 per FEU to $8439, a 1.27% drop.
Industry insiders attribute the market turmoil to an oversupply of shipping capacity, leading to aggressive discounting and market chaos. Although shipping companies hope to raise rates on the U.S. routes before the October 1 Chinese National Day holiday, given that some European and American routes already have loading rates below 80%, the likelihood of successful price hikes is low.
Shipping Giants Suspend Services Before Golden Week
As China’s National Day Golden Week (October 1) approaches, shipping companies, concerned about a potential further drop in spot rates, have canceled multiple export sailings from Asia to Europe and the U.S. to adjust capacity. An industry insider predicts that more sailings will be suspended during the key weeks of low demand to avoid a repeat of the rate wars. The strategy is believed to help stabilize the market if current trends and route diversions continue.
According to Drewry’s latest data on canceled sailings, 68 out of 696 scheduled sailings on major trade routes, including trans-Pacific, trans-Atlantic, and Asia to Northern Europe and the Mediterranean, have been canceled, representing a 10% cancellation rate. Specifically, 51% of the canceled sailings are on the trans-Pacific eastbound routes, 28% on the Asia to Northern Europe and Mediterranean routes, and 21% on the trans-Atlantic westbound routes.
At the alliance level, THE Alliance canceled 17 sailings, while Ocean Alliance and 2M Alliance canceled 12 and 10 sailings, respectively. Non-alliance carriers canceled 29 sailings.
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Freight Rates Remain High Despite Recent Declines
Despite recent declines in spot rates on Asia to Europe and trans-Pacific eastbound routes, there is no evidence that these drops are due to major carriers significantly cutting rates. According to Drewry’s World Container Index (WCI), rates from Asia to Northern Europe remain 350% higher than a year ago. Although there was a slight drop of 3% this week, rates are still high at $7204 per 40-foot container.
However, reports indicate a short-term rate from Ningbo to Felixstowe at $5000 per 40 feet, valid until September. An independent UK NVOCC also received a quote of $4500 per 40 feet from China to Southampton, noting that prices might decrease further with ongoing alliance restructuring.
Trans-Pacific rates remain stable, with the WCI showing a 2% drop to $6248 per 40 feet to the U.S. West Coast and a 2% drop to $8591 per 40 feet to the U.S. East Coast. Despite the decline, rates from Asia to the U.S. West and East Coasts are still up 180% and 150% respectively compared to last year.
Notably, while shipping companies have managed capacity on trans-Pacific routes to adapt to market changes, potential strike threats at U.S. East Coast ports and new import tariffs are likely to support rates. Although weak market demand and the entry of new smaller carriers may introduce some competitive pressure, overall rates remain stable.
In other regions, spot rates on the trans-Atlantic westbound routes from Northern Europe to the U.S. East Coast remain stable around $2000 per 40 feet. Exporters face tight deadlines to ship goods to avoid potential strikes at U.S. East Coast ports.
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