Freight rates are falling inexorably! Can't be stopped
According to a new report released this week by consultancy Linerlytica, Mediterranean Shipping, Ocean Alliance and Gemini Alliance are taking steps to cancel some trans-Pacific and Asia-Europe routes in an effort to stem the continuing downward trend in freight rates. But freight rates continue to fall trend has been unable to stop!
Specifically, the Trans-Pacific Mustang route, which Mediterranean shipping originally planned to resume operations in July last year, was delayed due to bottlenecks in Singapore and has now been confirmed as unachievable, with the original vessels being redeployed to other routes. For its part, Ocean Alliance has postponed the launch of the Asia to Northern Europe route (NEU3) this month. While the "Twin Star" alliance may retain the two trans-Pacific routes originally scheduled to start in May, the overall capacity adjustment is also under way.
However, Linerlytica noted that these capacity cuts may not be enough to stem downward pressure on freight rates. Although the Shanghai Container Freight Rate Index showed that freight rates between Shanghai and Northern Europe rose 7% from the previous week to $1,693 /TEU on February 28, this increase was not effectively supported by freight volumes.
Linerlytica said: "Carriers appear hesitant to reduce capacity on routes from Asia to Northern Europe, which has limited effect on supporting freight rates, as the planned increase on March 1 failed to materialise in anticipation of significant price cuts." While Nordic SCFI freight rates rose 7.3 per cent at the end of last week, real freight rates remain under downward pressure as trade demand fails to keep pace with supply growth."
In addition, Mediterranean Shipping's move to divert its 24,000 TEU vessels from the Asia-to-Northern Europe route to the Asia-to-Mediterranean and West Africa routes and suspend the NEU3 route has not effectively alleviated the overcapacity problem. According to Linerlytica's analysis, the weekly capacity departing in April remained at a high level of around 300,000TEU.
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Spot freight rates on trans-Pacific routes also continued to fall, with freight rates between Shanghai and the West Coast of the United States falling below $2,500 /FEU for the first time since January 2024, and yesterday the Freightos Baltic Index showed freight rates on the route at $2,405 /FEU, the lowest since December 2023.
In response to the cancellation of the Mustang route to the Pacific Northwest by Mediterranean Shipping, Linerlytica believes that the move will not have a direct impact on trade capacity, as MSC had already cancelled the initial four flights in February. Meanwhile, the planned rate increase has been postponed until the second half of this month, but in the current uncertain market environment, even the planned increase is unlikely to materialize.
"The additional 10 percent tariff imposed by the United States on Chinese imports has resulted in very low trans-Pacific traffic, further adding to the downward pressure on freight rates," Linerlytica noted.
