- Freight Rates Continue Freefall Despite Port Congestion.
- US Tariffs Add Pressure on Container Volumes.
- Operating Margins Slip Below Breakeven on Key Routes.
Extreme weather conditions in South China and North Vietnam have thrown vessel schedules into chaos, causing significant port congestion throughout the Far East this week. Even with these disruptions, freight rates are plummeting as carriers gear up for attempts to restore rates by mid-October, hoping to stop the bleeding of further losses, reports Linerlytica.
Weak Prospects for Rate Recovery
The market outlook is grim, with cargo volumes facing pressure and no substantial capacity reductions on the horizon. The new U.S. tariffs on kitchen cabinets and furniture are likely to add to the decline in container volumes, which were already struggling due to previous import restrictions.
Profitability Under Strain
Operating margins have dipped below breakeven on several major trade routes after the recent rate drop. Carriers are still focusing on maintaining market share rather than profitability, even as the disparity between charter rates and freight rates reaches unprecedented levels.
Charter Rates Defy Market Trends
The SCFI and CCFI have plummeted by 70% and 50% respectively, since their peaks in 2024. In contrast, Linerlytica’s Charter Rate Index (CRI) has been on the rise, pushing the CRI-to-CCFI ratio to an all-time high of 318%. The strong charter rates and secondhand vessel prices indicate that carriers are still keen to secure tonnage, underscoring a lack of effective capacity management.
Outlook for Q4 Remains Weak
The anticipated rate hikes in mid-October are unlikely to be effective without significant service cuts. So far, the withdrawals of services for the winter season have been minimal, increasing the risk of further declines in freight rates as the market enters the typically slower fourth quarter.
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Source: Linerlytica
