Sea Freight Rates Are Falling Continuously! Shipping Companies Cancel More Voyages and Plan to Charge Surcharges

The three major variables of the epidemic, inflation and the Russian-Ukrainian crisis have impacted the container market. The Shanghai Export Containerized Freight Index (SCFI) has dropped to a low for nine consecutive years since November last year.

According to the latest data on March 18, the SCFI index continued to drop by 1.83% to 4540.31 points. Except for the eastern route of the United States, the freight rates of other major routes were falling. The freight rates of the European routes fell to a new low since mid-July last year. Line freight rates have fallen 12.8% over the past two months.

Among them, the freight rate of the US West Line fell for two consecutive weeks, and the FEU freight rate continued to drop by US$82 to US$8,023 each time. The 1.01% reflects a slight easing of port congestion. U.S. Eastern freight rates remain at $10,634/USD FEU, the lowest level in the past two and a half months. The European line freight price fell for 8 consecutive weeks to $6,797/USD TEU, which was a further drop of $222 or 3.16% from the previous week.

But compared with the market in the same period last year, the SCFI composite index is still up more than 75% year-on-year. Compared to last year, freight rates on the US East and West US routes still doubled, up 121% and 101%, respectively, and the European routes rose by more than 85%. Unlike last year's rising freight rates, this year's freight rates continue to fluctuate at high levels.

According to industry insiders, market supply and demand determine freight rates. With the slowdown of the epidemic and the unblocking of European and American countries, consumption trends have begun to shift from goods to services. Furthermore, inflationary pressures are reflected in prices. The demand side in Europe and the United States seems to show signs of slowing down, and the long-term impact remains to be seen. At the same time, China's liquidation policy has affected production and transportation in many factories. Shipments are expected to gradually increase in March, but the current wave of shipments appears to be delayed.

On the other hand, the crisis in Russia and Ukraine also led to the continuous wait-and-see of shippers, and the short-term decline in European demand was reflected in the continuous decline in freight rates on European routes. However, the medium to long term will complicate the container shipping supply chain and may further drive up freight rates.

Overall, many container shipping companies predict that the market will remain in short supply this year. The West American Docks Union has entered the negotiation stage. It may strike if past experience doesn't go well. The subsequent intensification of port congestion cannot be ruled out.

Spot rates have continued to fall in response to sluggish demand, also prompting ocean carriers to suspend more flights. 2M Maersk and Alliance MSC recently announced three more blank sailings in April, which MSC attributes to the continued challenging market conditions.

Despite softening rates, shippers are bracing for significant increases in carrier fuel surcharges, as well as skyrocketing shipping costs. This week's report shows that from April 1, most ocean carriers will add fuel surcharges to their shipping costs on routes.