Container Spot Rates Dive as Lunar New Year and Suez Resumption Rattle the Market

This week’s World Container Index (WCI) from Drewry saw the transpacific spot rate on its Shanghai-Los Angeles leg lose 8% week on week, to finish at $4,.813 per 40ft, while the Shanghai-New York route lost 7%, to end at $6,377 per 40ft. Similarly, Xeneta’s XSI transpacific index fell 3%, to $5,162 per 40ft.

But the greatest damage to carrier earnings was seen on Asia-Europe trades, where warnings of a nascent rate war earlier this month appear to be borne out. The WCI’s Shanghai-Rotterdam leg crashed 19% on last week, to $3,434 per 40ft, which is some 31% down year on year, while the Shanghai-Genoa route declined 10% week on week, to $4,562 per 40ft.

One unsolicited offer from a Chinese forwarder received by The Loadstarthis week quoted $2,300 per 40ft from Shanghai to UK ports, suggesting that, at the bottom end of the spot market, rates of some $1,000 per 40ft below index levels can be found.

The Shanghai International Freight Index (SCFI), published today, was also down, but it showed much gentler declines, losing 6% on Shanghai-North Europe. However, the SCFI records rate quotes for the forthcoming week, and activity over the next fortnight will be extremely muted. Instead, it is the Hamas-Israel ceasefire and subsequent Houthi declaration of ceased attacks on shipping that are likely to have the most effect on rate pricing over the coming weeks – especially if it means carriers will return to transiting Suez, thus provoking what could become a severe overcapacity crisis. “If we see a gradual return to Suez routings following the ceasefire, then rates are going to tank,” Sea-Intelligence CEOAlan Murphy told The Loadstar today. “For the shipping lines – and investors in shipping lines – the somewhat cynical financial perspective is that this [the ceasefire] is bad news.

“The high freight rates are clearly supported by the severe capacity absorption from the round-Africa services, as a consequence of the Red Sea crisis. A reversal to Suez would bring the global supply/demand balance back to the level we saw towards the end of 2023,” he added.

The common perception among analysts is that a return to Suez is also likely to lead to a temporary upsurge of port congestion in Europe, as Freightos head analyst Judah Levine explained: “The adjustment period to the shorter route for traffic from Asia to Europe and the Mediterranean, as well as some volumes to North America, could last for several weeks or longer. “Schedule disruptions and vessel-bunching in Europe and Asia as ships start arriving early will cause some congestion and delays at these hubs, which could put upward pressure on rates in the short term,” he said. However, Mr Murphy said that, over the longer term, he could only see rates continuing to decline.

“After a somewhat turbulent period with port congestion issues in Europe, spot rates will drop sharply. The carriers have been voicing that the decline will not be as bad, but from a supply/demand perspective, it is hard to see any other outcome than a rapid decline towards the depths seen in 2023 – at least for a temporary period. “The carriers have never managed a ‘soft landing’, and the market drop after reopening the Suez route, will likely not be any different,” he said.

In November 2023, spot rates from Asia to North Europe stood at around a sub-economic $1,000 per 40ft, which suggests there is still some way for prices to fall until they become loss-making for carriers.