According to Marine Link, the Shanghai Containerized Freight Index (SCFI) has witnessed a significant drop of 43% during the third quarter of 2024, marking the largest Q3 decline since the SCFI’s inception in 2009, excluding COVID-affected years. According to Niels Rasmussen, Chief Shipping Analyst at BIMCO, this is only surpassed by the 2022 plunge, which followed a 24-month cargo boom fueled by high consumer spending during the pandemic.
Market Imbalances and Rate Declines
The SCFI measures spot container rates for shipments from Shanghai and is a key indicator of the supply-demand balance in the market. Rates are often adjusted swiftly based on capacity utilization, unlike contract rates, which take more time to reflect market changes. Major declines have been observed in freight rates to Europe, the Mediterranean, and both the US West and East Coasts, with spot rates to Europe and the Mediterranean falling by nearly 55%.
Time Charter Rates and Rerouting Impact
Unlike freight rates, time charter rates have remained relatively stable in Q3, supported by limited ship availability and continued demand from Red Sea rerouting. However, Niels Rasmussen warns that the medium- to long-term outlook for freight rates is concerning, with a potential release of 10% of the fleet currently engaged in the rerouting, adding further pressure on supply as global fleet growth continues.
Short-Term Market Relief
In the short term, factors such as lower bunker prices and strikes at US East and Gulf Coast ports may temporarily lift freight rates in those regions, but overall, the long-term development remains a challenge for carriers.
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Source: Marine Link
