Entering the traditional off-season at the end of the year, the Christmas shipping rush in the container shipping market has come to an end. The weak volume of goods has directly led to the downward pressure on freight rates. The latest Shanghai Containerized Freight Index (SCFI) released by the Shanghai Shipping Exchange on December 5th stood at 1,397.63 points, a decrease of 0.39% compared to the previous week.

By route, last week, except for the Mediterranean route, the freight rates of other major ocean routes all showed a downward trend. Specifically, it is manifested as

On the West Coast of the United States route, the freight rate per FEU dropped by $82 to $1,550, with a weekly decline of 5.02%.

On the Eastern United States route, the freight rate per FEU dropped by $113 to $2,315, representing a weekly decline of 4.65%.

European route: The freight rate per TEU slightly dropped by $4 to $1,400, with a weekly decline of 0.28%.

Mediterranean route: Against the trend, the freight rate per TEU rose by 68 US dollars to 2,300 US dollars, with a weekly increase of 3.05%.

During the same period, the freight rates of near-sea routes remained generally stable. The freight rates for the Kansai, Kanto and South Korean routes in Japan remained the same as the previous week, at $312, $321 and $143 per TEU respectively. The freight rate on the Southeast Asia route rose slightly by 3 US dollars to 543 US dollars per TEU.

The double squeeze of insufficient cargo volume and expanded transportation capacity

Industry insiders point out that the current cargo volume on the US route is limited, but the market capacity is continuously increasing, which has put considerable pressure on freight rates. At the end of November, 

the freight rate per FEU on the US West Coast route once dropped to near the key cost line of $1,300. To prevent freight rates from further hitting rock bottom, major container shipping companies attempted to raise 

the price by about 600 US dollars in the first week of December. However, due to insufficient support from actual cargo volume, the situation eventually showed a pattern of "rising first and then falling". Currently, 

the freight rates for the US West Coast route in the market are approximately $1,500, and for the US East Coast route, they are about $2,200.

It is worth noting that despite being in the traditional off-season, major shipping alliances have not significantly increased the number of suspended flights (blank flights). It is learned that the current strategic focus

 of leading companies has shifted to competing for market share. The market surface freight rate for the US West Coast route is approximately $1,500 per FEU. However, in order to attract major clients or maintain 

space utilization, some companies have offered special discounts as low as about $1,350. As a result, market competition has intensified, and the risk of a price war is emerging.

At present, the overall container loading rate for exports in the Chinese market hovers around 70%. The industry generally expects that the freight rates on the US line are likely to bottom out and rebound between

late December and January next year, when there will be a concentrated shipment and stockpiling rush before the Spring Festival. Furthermore, although the ocean-going market is under pressure, the steady

demand for short-sea routes (such as Southeast Asia) is believed to be able to offset some of the pressure during the off-season in Europe and the United States to a certain extent.

The growth rate of transportation capacity has reached a record high, and the shadow of structural overcapacity looms

Behind the short-term fluctuations in the market lies a more profound concern over overcapacity. According to Clarksons data, the global container fleet size exceeded the 7,000 mark in early November, reaching

7,007 vessels, with a total capacity of 32.7 million TEUs. Over the past 37 months, the fleet size has soared by more than 1,000 vessels, with an increase of 16.67% in the last three years, setting a record for the

fastest expansion rate in history.

Meanwhile, new shipbuilding orders remain at a high level. As of early September this year, global orders for container ships have exceeded 10 million TEUs. At present, as many as 991 new ships are still scheduled

to be delivered by the end of 2028. According to the current trend, the global container fleet is likely to exceed 8,000 vessels in the next three years.

There may be a rebound before the Spring Festival, but the long-term balance still has a long way to go

Overall, the container shipping market is undergoing a dual test of the regular demand off-season after the Spring Festival and the historic peak in capacity delivery. In the short term, the traditional small peak of 

shipments before the Spring Festival will be a key time window to support the stabilization and recovery of freight rates.

However, from a long-term structural perspective, the rapid growth of transportation capacity has clearly outpaced the growth rate of demand, and the market is moving towards a new cycle of oversupply. How

shipping companies strike a balance between seizing market share and maintaining stable freight rates, and jointly respond to structural adjustments such as the accelerated dismantling of old ships, will be the key

to determining the health of the industry in the coming years.

Article source: Shipping Information