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Ocean freight slides across all routes! U.S. lines plunge!
Aug 26, 2024|
View:45On the 23rd, Shanghai Export Container Freight Index (SCFI) again showed a downward trend, characterized by the four major routes in Europe and the United States of America and the United States of America, especially the most significant decline in the U.S. routes.
The main reason for this decline in freight rates is attributed to the continued weak market demand and the continuous influx of new capacity.
Specifically to the four major routes in Europe and the United States, tariffs were unavoidable decline: the U.S. West route and the U.S. East route suffered a heavy blow, respectively, a significant drop of 9.51% and 8.08%; and the European route and the Mediterranean route were not spared, respectively, recorded a decline of 4.56% and 2.63%.
In addition, the industry is particularly concerned about the potential risk of a strike by U.S. East Coast dockworkers, however, analysis suggests that unless a strike occurs in the U.S. East, the current downtrend in freight rates is expected to continue.
The general consensus of the industry is that the continuous injection of new capacity into the market, mainly through the addition of extra ships and new routes, has greatly intensified the competitive situation in the market, and has become the core factor of the current downward pressure on freight rates. Large freight forwarding agencies based on the current situation predicts that unless the U.S. East Coast strike this extreme event, or else freight rates are likely to continue to show a decreasing weekly trend.
According to the freight forwarding industry, since mid-August, shipping companies try to raise freight rates in the U.S. market, but faced with many difficulties, failed to do so. This week's U.S. line tariffs fell significantly widened, is actually the past two weeks of downward pressure accumulated a concentrated release. Meanwhile, European and U.S.-West routes are relatively stable, but also show a slow decline in the trend, about 200 to 300 U.S. dollars per week.
It is worth noting that the market alliance shipping companies to compete for cargo sources, began to take a more flexible pricing strategy, resulting in a significant expansion of price differences. On the U.S.-West route, some of the alliance shipping lines insisted on high pricing strategy and maintained their quotes above US$6.000. while some others adopted low pricing competition and introduced preferential prices of about US$4.600 to attract customers.
The current market quotation and information environment presents a rather confusing state, with different routes and shipping lines adopting very different business strategies. Some shipping lines adopt a fixed one-bite price strategy, while others choose to offer special prices before the start of the voyage to attract cargo volume when the loading rate is insufficient. Other shipping lines indirectly realized the downward adjustment of tariffs by adjusting the ratio between long-term contract prices and spot market prices. Despite the downward pressure on freight rates, shipping companies are still maintaining a high level of profitability.
In-depth analysis by industry insiders pointed out that before the ceasefire negotiations in the Gaza area were reached, the continuation of geopolitical tensions resulted in ships being forced to prolong the time of detouring, which, to a certain extent, formed a supportive role for freight rates. However, with the gradual weakening of market demand and the continuous influx of new capacity, shipping companies are faced with the major challenge of maintaining price stability.
In order to cope with this situation, shipping companies adopted various strategies, including the implementation of port-hopping strategy to reduce the number of calls, arranging empty sailings to control capacity injection, and replacing large vessels with smaller ones to flexibly adjust the supply of slots. At the same time, carriers also attempted to counteract the downward trend in freight rates through moderate price increases, in an effort to maintain stability and sustainability of profitability in a complex and volatile market environment.
