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Container freight rates have been sliding since July this year and the declines have accelerated in September, sending shipping rates lower than 10% of the year-ago level, according to industry insiders.
The Shanghai Containerized Freight Index (SCFI) compiled by the Shanghai Shipping Exchange, hit 2,072.04 on Friday, sliding by 10.4% from the previous week and diving by about 60% from that at the start of the year.
In particular, the cost for transporting a forty-foot equivalent unit (FEU) from Shanghai to US West Coast has dropped to $2,684, slumping by nearly 70% from the start of the year, while the cost for transporting a twenty-foot equivalent unit (TEU) from Shanghai to Europe has declined to $3,163, tumbling by about 60% from the start of the year.
“In September last year, the cost for shipping a FEU to Los Angles in the US touched as high as $30,000, but now it only costs around $2,500,” said an export merchant.
As spot shipping rates plunge, many export merchants choose spot market instead of long-term contract, while other merchants choose to sign new contracts with shipping companies.
Compared to the freight rates for the shipping routes to the US and Europe, freight rates for routes in Asia plunged even more rapidly. On Friday, the cost for transporting a TEU from Shanghai to Singapore fell to $386, plunging 74.1% from the start of the year.
If excluding the low-sulphur fuel oil surcharges, the real freight rates for routes from China to Vietnam and Thailand has slipped into negative territory, said Guo Shaohai, former vice president of CMA CGM China.
The slumping container freight rates were mainly attributable to falling cargo volume. According to shipping giant Maersk, its container volume decreased by 7.4% in the second quarter from a year earlier. Industry insiders said that container volume from China declined by about 30% from a year earlier.
Container volume remained weak despite that the period before the National Day holiday is traditionally a busy season and the situation in October – November could be even weaker, said industry insiders.
The falling shipping demand is due to sluggish market demand in the US and Europe as consumer confidence was dented by the intensifying Russia-Ukraine tensions. In addition, the Europe is experiencing a natural gas crisis due to sanctions on Russia energy supply and that could further hurt consumer confidence this winter.
In addition, port congestions around the world have been easing, according to global logistics platform Flexport’s OTI. On September 18, it took an average of 84 days for shipment from Asia’s factories to ports in North America, decreasing by 30 days from 114 days seen in January this year. Meanwhile, it took an average of 95 days for shipment from Asia to European ports, sliding by 27 days from 122 days in April.
Data from the Shanghai Shipping Exchange showed that vessels’ container waiting time at Chinese ports was well below one day in August, compared to more than two days last winter.