Freight rates will fall by 70% in the coming year according to Linerlytica, but Xeneta claim that for such a decrease to occur it would mean that the Suez Canal has reopened and that There is massive over-capacity, according to Container News.
Overcapacity
Consultancy Linerlytica said today it expects freight rates to fall by 70% over the next 12 months, as carriers have failed to prevent the slide in rates seen since July according to statistics from the Shanghai Container Freight Index (SCFI).
Container shipping lines have struggled to arrest the rate of deterioration that followed the July zenith, after what appeared to be an early peak season, as demand wanes, and another 36 ships, of just under 205,000 TEUs, were delivered over the last month.
“Freight futures continue to weaken, with North Europe rates trading at a discount of over 70% to current spot rates,” said Linerlytica.
Long-term contract rates could see the biggest impact on global container shipping market.
According to the consultant, shipping lines have failed to maintain spot rate levels with the SCFIS fell 12% on the North European trades from July, which has seen a steady 1-3% weekly decline until last week’s 7.3% drop.
The SCFI has also seen rates deteriorate by 5.6% over the past week on the Pacific and Middle East trades.
However, Xeneta’s chief analyst Peter Sand believes that a prerequisite for a 70% fall in contract rates will be a resolution to the Red Sea crisis and a return of vessels trading via the Suez Canal.
Volumes are up, said Sand, but they are on par with volumes in 2021 and 2022, “this is not a demand driven market,” he said.
According to Xeneta, CTS data total volumes, dry and reefer, have increased 6.5% in the first half of 2024 compared to 2019 volumes, from 84.1 million TEUs in H1-2019 to 89.6 million TEUs.
In the same period the fleet has increased “a whopping 30.8%” said Sand, quoting Xeneta, Clarksons data, to 29.569 million TEUs, by the end of H1-2024 from 22.603 million TEUs in mid-2019.
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Source: Container News
