Box rates rates sink to lowest levels since Red Sea crisis
Container Freight Rates Plummet Amid Weak Demand
Container freight rates are experiencing a significant decline, with Drewry’s World Container Index (WCI) falling 8% this week to $1,761 per forty-foot equivalent unit (feu). This marks the fifteenth consecutive week of decreasing rates, as carriers grapple with softening demand despite attempts to reduce capacity. Key trade routes are feeling the impact, with spot rates from Shanghai to Los Angeles dropping 10% and rates to New York decreasing by 8%.
Market Trends and Rate Declines
The downward trend in freight rates is evident across various major trade lanes. For instance, the Shanghai–Rotterdam route saw a 9% drop to $1,735, while the Shanghai–Genoa route fell 7% to $1,990. As the industry prepares for China’s Golden Week factory shutdown, carriers have been pulling back on capacity. However, Drewry warns that with demand remaining weak, further erosion of rates is likely.
The Shanghai Containerized Freight Index (SCFI) has also reported its most significant weekly decline in nearly a decade, plummeting to 1,198.21 points on Thursday and further down to 1,114.52 points on Friday. This is a stark contrast to the SCFI’s average of 1,645 in the second quarter, reflecting a 37% decrease year-on-year. Additionally, the China Containerized Freight Index (CCFI) has dropped 19% compared to last year, with transpacific routes facing the most severe reductions—West Coast rates are down 31%, and East Coast rates have decreased by 23%, according to NH Investment & Securities.
Lars Jensen, head of container consultancy Vespucci Maritime, highlighted that current spot rates are now at or below levels seen before the Red Sea diversions at the end of 2023, a time when carriers were already operating at a loss. He noted that the seasonal lull associated with the Golden Week has not yet fully set in, and Atlantic westbound rates have also seen a decline of over $100 per feu, reaching their lowest point since early February.
Carrier Responses and Regulatory Changes
In response to the declining rates, carriers are beginning to adjust their pricing strategies. Hapag-Lloyd has announced new Freight All Kinds (FAK) rates effective October 15, setting rates at $1,200 for 20-foot containers and $2,000 for 40-foot containers destined for Northern Europe, with higher rates for shipments to the Mediterranean and Black Sea regions.
In a separate development, Ocean Network Express (ONE) has alerted shippers about increased scrutiny from US Customs regarding commodity descriptions, effective September 27. This tightening of audits could result in fines, delays, or even cargo seizures if the data provided is not accurate. As the market continues to navigate these challenges, stakeholders are urged to remain vigilant and adapt to the evolving landscape.
