Photo: Mediterranean Shipping Company (MSC)

Market adjustment: global freight rates begin to slowly decline

WORLDWIDE
Friday, August 09, 2024, 01:00 (GMT + 9)

Various trends indicate that the market has changed as global freight rates have slowly begun to fall after a long period of increases.

Due to the decline in Asian ship loading utilization, the three major indexes have been declining slightly since July. The most significant decline was in the trans-Pacific Asia-North America route. The Drewry World Container Index (WCI) (as of August 1) fell 1% week-on-week to $5,736 per 40 feet, of which the Shanghai-Los Angeles route fell 3% week-on-week, Shanghai-New York fell 1%, and Shanghai-Rotterdam fell 1%. As of July 25, Xeneta's trans-Pacific XSI route fell 6% to $7,322 per 40 feet; the FreightosFBX route fell 4% to $7,738 per 40 feet. At the same time, freight rates on the Asia-North Europe route remained flat or fell slightly.

The US-West route also saw a significant drop, with freight rates falling by 5.5%, making it the most volatile of the main routes, due to the temporary introduction of new capacity. Initially, there was an attempt to increase prices by $1,000 per large container to $8,100-8,500 on July 1. However, the arrival of overtime ships and new routes led the industry leader Mediterranean Shipping Company (MSC) to maintain the original price of $7,500, avoiding the planned increase. This decision laid the foundation for further rate cuts, with most shipping companies reducing rates to $7,900 on July 7 and eventually to $7,500.

Major freight companies that originally planned to announce price increases in July have canceled their original plans and even lowered freight prices due to market changes. In response to the oversupply of space, large and super-large freight forwarding companies have also adopted price reduction strategies. Some freight forwarding companies predict that FAK (flat-rate) prices will fall further in the coming weeks. The recent drop in freight rates marks a key shift in the shipping industry.

Industry insiders attribute the fluctuations on the US-West Coast route to the increased supply of overtime vessels, as well as lower-than-expected cargo volumes. Although some delays in return vessels have balanced the supply and demand dynamics, freight rates on this route have experienced significant fluctuations. In contrast, freight rates on the US-East Coast and European routes have remained relatively stable. The market generally believes that prices will gradually adjust rather than fall sharply, and freight rates are expected to continue to decline slowly in July.

On August 1, 2024, the Baltic Dry Index (BDI) fell 2.34% to 1,668 points, the lowest level since April 10, 2024. The BDI fell -9.05% in the past week and -20.31% since the beginning of the year. The BDI Baltic Index is calculated by weighting the spot freight rates of several major routes, reflecting the spot market situation. Therefore, the level of freight prices will affect the rise and fall of the index.

Although shipping prices have slowly declined since reaching their peak, the current shipping supply chain is still under pressure and may be disrupted at any time. The impact of the Red Sea crisis is still ongoing, the cost of sailing around the Cape of Good Hope has increased, and there is a risk of strikes by workers at ports along the east coast and the Gulf of Mexico in the United States. In addition, the US presidential election may trigger a wave of shipments by companies, and US retailers will stock up before the new tariff policy.

Source:  Zhejiang Zhoushan International Agricultural Products Trading Center 

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