Will Freight Rates Rebound at The End of The Month?

 The SCFI index has been declining for five consecutive weeks

      Core Tip: The consolidated freight rates continue to decline, but the industry expects a turnaround by the end of the month.

      The consolidated freight rates continue to decline, but the industry expects a turnaround by the end of the month.

      According to the latest data released by the Shanghai Airlines Exchange on September 20th, the SCFI index fell 144.71 points to 2366.24 points last week, a weekly decline of 5.76%, and has been declining for five consecutive weeks. Freight rates for the four major European and American routes have continued to decline, with the European and Mediterranean routes experiencing significant declines.

      Last week, the FEU freight rate for the Far East to West Coast route dropped by $153 to $5341, a weekly decrease of 2.78%; The FEU freight rate from the Far East to the East Coast of the United States fell by $352 to $6486, a weekly decrease of 5.15%; The price per TEU for the Far East to Europe route dropped by $249 to $2592, a weekly decrease of 8.76%; The freight rate per TEU on the Far East to Mediterranean route fell by $410 to $2955, a weekly decrease of 12.18%.

      On the near ocean route, the price per TEU from the Far East to Kansai, Japan has increased by $3 compared to the previous week, reaching $301; The price per TEU from the Far East to the Kanto region of Japan has increased by $3 compared to the previous week, reaching $309; The price per TEU from the Far East to Southeast Asia has dropped by $35 to $412 compared to the previous week; The price per TEU from the Far East to South Korea has dropped by $6 to $141 compared to the previous week.

      Industry insiders pointed out that the labor negotiations between the East Coast and Gulf of Mexico ports have reached a stalemate, and the probability of a strike by the International Longshore Workers Association on October 1st has increased significantly. European shipping companies such as Dafei and Hapag Lloyd have fired the first shot of price increases, and it is expected that a "port congestion surcharge" will be imposed on goods in the East Coast from mid October.

      Among them, Dafei is expected to impose a "local port fee" of $1500 per TEU on goods shipped to ports along the East Coast of the United States and the Gulf of Mexico starting from October 11th; Hapag Lloyd plans to impose a "work interruption surcharge" starting from October 18th, at a rate of $1000 per TEU. Based on this, it can be inferred that the surcharge for each FEU will double to $3000 and $2000, respectively.

      Once the strike situation at the East Coast ports escalates, the shipping companies will inevitably increase their efforts to reduce schedules and reduce cargo space. With various additional fees added together, not only will the freight rates on the East Coast increase dramatically, with each FEU possibly soaring to $10000, but with a large amount of goods rushing towards the West Coast, there will inevitably be a situation of full capacity, which may also trigger supply chain bottlenecks. At that time, even the freight rates on the West Coast may reverse upwards.

      However, due to the upcoming National Day holiday in China, it will take about a week for shipments to begin after resuming work. Therefore, freight rates are not expected to significantly rebound this week. It is expected that the impact will gradually expand when the strike time is extended to more than a week, and it will also have a significant upward effect on freight rates.

      In addition, according to Alphaliner data, after deducting the number of ships undergoing dock repairs, the idle rate of container ships remained at a low point as of August 26 this year, with a global idle rate of only 0.7%. In addition, some important ports occasionally experience congestion, and with the impact of route detours, the overall supply of transportation capacity remains tight.

      Looking ahead to the future, although freight rates continue to decline, North American and Asian ports still face delays due to the ongoing Red Sea crisis, as well as factors such as an earlier Spring Festival in 2025 compared to previous years. It is expected that freight volume will remain stable in the fourth quarter of this year, and freight rates will be adjusted steadily. The outlook for freight rates in the fourth quarter and next year remains optimistic and positive.

      If you need any marine products, please feel free to contact Deyuan Marine at any time!