SCFI blip can’t mask deepening container carnage ahead of Q4

Despite a brief uptick in the Shanghai Containerized Freight Index (SCFI), container shipping lines are bracing for significant financial losses in the final quarter of the year. The SCFI ended an 11-week decline by rising 30 points to 1,445, but other indicators, such as the World Container Index, continue to show downward trends. Analysts predict that the combination of falling rates and reduced cargo booking volumes will lead to a challenging end of the year for carriers.

Declining Rates and Demand Pressures

The recent fluctuations in freight indices have raised concerns among shipping analysts. The World Container Index reported a 6% drop, bringing the cost to $2,119 per forty-foot equivalent unit (feu). This decline has pushed rates on major routes, particularly the transpacific, close to levels seen before the Red Sea crisis. Peter Sand, chief analyst at Xeneta, noted that while carriers might see profits in 2025, the fourth quarter of this year is likely to be marked by losses. He emphasized that the last time rates were this low, carriers faced significant financial challenges.

HSBC’s freight market update echoed these sentiments, suggesting that while some temporary support for freight rates might arise from capacity discipline, the ongoing imbalance between supply and demand will ultimately drive rates lower. Linerlytica, an Asia-based consultancy, reported a 5% to 20% drop in cargo booking volumes over the past two weeks, with routes to the transpacific, Asia-Europe, and Latin America experiencing the most pressure.

John McCown from Blue Alpha Capital warned of a bleak outlook for the transpacific route, predicting a 5.6% decrease in total inbound volume for 2025. This forecast suggests a drastic 17.5% decline in containerized imports over the last five months of the year, despite a year-to-date increase of 3.6% through July. With the transpacific route appearing the weakest among major trade lanes, experts anticipate that carriers will need to take decisive action to mitigate losses.

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Seasonal Trends and Future Outlook

Historically, the Pacific trade experiences a downturn in October following the Chinese Golden Week, and this year is expected to follow suit. Lars Jensen, head of Vespucci Maritime, indicated that if seasonal trends hold, both demand and spot rates in the Pacific are likely to decline further. He advised shippers to prepare for a series of blank sailings in the fourth quarter as carriers adjust to the reduced demand.

Looking ahead, Sea-Intelligence forecasts a supply growth of 5-8% over the next three years, which is unlikely to be matched by global container demand. This imbalance could lead to persistent overcapacity in the market, pushing spot rates down to marginal cost levels. The consultancy’s recent report cautioned that the industry should brace for ongoing challenges as it navigates these turbulent waters.