Container rates could fall by as much as 70% in the next 10 months
Recently, the shipping consulting authority Linerlytica released a forecast, pointing out that the next 10 months container freight rates will drop significantly, or 70%. This forecast is based on the continued downward trend of the Shanghai Container Freight Index (SCFI) and freight futures market, as well as the actual performance of the freight market since July.
Container shipping lines are facing the challenge of falling freight rates as global trade demand weakens, although shipping lines have tried to slow the trend after the traditional peak season in July, according to analysts. However, market data show that the trend of declining freight rates has not been effectively curbed, and a large number of new ships have been delivered recently, further aggravating the imbalance between supply and demand in the market.
Linerlytica noted that according to the Shanghai International Energy Exchange (INE) CoFIF EC contract data, container freight rates are expected to fall by more than 70% until June next year. The performance of freight futures markets further confirms the expectation of lower freight rates. In addition, as a key factor affecting the global container shipping market, the downward trend of long-term contract rates cannot be ignored.
"While the decline is not as severe as the freight crash at the end of 2022, at current freight futures prices, the decline is expected to continue over the next 12 months, with no rebound expected at the end of the year and no repeat of this year's post-Lunar New Year freight increase in 2025," Linerlytica said in a market update.
"European/Mediterranean freight rates are expected to remain under downward pressure, given the continued commissioning of new vessels and growing capacity in the market," HSBC highlighted in a cargo market report released this week. This analysis further confirms the weak trend of the current freight market.
However, Peter Sand, principal analyst at Xeneta, takes a different view. He believes that although the decline in freight rates is a high probability event, the reduction of 70% is the premise of the Red Sea crisis is resolved and the normal navigation of the Suez Canal is restored. Sand stressed that the current market is not entirely driven by demand, but is influenced by a number of complex factors. He pointed out that the total amount of CTS data (including dry bulk and reefers) in the first half of 2024 has increased compared to 2019, but the fleet size has also expanded by 30.8%, which has eased the contradiction between supply and demand to some extent.
Sand further analyzed that the lengthening of sailing distances caused by the Red Sea crisis had a profound impact on the market, turning what could have been a massive overcapacity into a tight market. Xeneta estimates that TEU mileage increased 18.3% year-over-year in the first four months of 2024, which has partially narrowed the gap between supply and demand and is reflected in current high contract and spot freight rates.
In general, the sharp decline in container freight rates in the next year has become the market's general expectation, but the specific decline and influencing factors still need to be further observed and analyzed.
Container shipping lines are facing the challenge of falling freight rates as global trade demand weakens, although shipping lines have tried to slow the trend after the traditional peak season in July, according to analysts. However, market data show that the trend of declining freight rates has not been effectively curbed, and a large number of new ships have been delivered recently, further aggravating the imbalance between supply and demand in the market.
Linerlytica noted that according to the Shanghai International Energy Exchange (INE) CoFIF EC contract data, container freight rates are expected to fall by more than 70% until June next year. The performance of freight futures markets further confirms the expectation of lower freight rates. In addition, as a key factor affecting the global container shipping market, the downward trend of long-term contract rates cannot be ignored.
"While the decline is not as severe as the freight crash at the end of 2022, at current freight futures prices, the decline is expected to continue over the next 12 months, with no rebound expected at the end of the year and no repeat of this year's post-Lunar New Year freight increase in 2025," Linerlytica said in a market update.
"European/Mediterranean freight rates are expected to remain under downward pressure, given the continued commissioning of new vessels and growing capacity in the market," HSBC highlighted in a cargo market report released this week. This analysis further confirms the weak trend of the current freight market.
However, Peter Sand, principal analyst at Xeneta, takes a different view. He believes that although the decline in freight rates is a high probability event, the reduction of 70% is the premise of the Red Sea crisis is resolved and the normal navigation of the Suez Canal is restored. Sand stressed that the current market is not entirely driven by demand, but is influenced by a number of complex factors. He pointed out that the total amount of CTS data (including dry bulk and reefers) in the first half of 2024 has increased compared to 2019, but the fleet size has also expanded by 30.8%, which has eased the contradiction between supply and demand to some extent.
Sand further analyzed that the lengthening of sailing distances caused by the Red Sea crisis had a profound impact on the market, turning what could have been a massive overcapacity into a tight market. Xeneta estimates that TEU mileage increased 18.3% year-over-year in the first four months of 2024, which has partially narrowed the gap between supply and demand and is reflected in current high contract and spot freight rates.
In general, the sharp decline in container freight rates in the next year has become the market's general expectation, but the specific decline and influencing factors still need to be further observed and analyzed.
