Shipping costs remain stable despite decrease in cargo volumes in the ocean trade

Shipping Rates Dip Amidst Growing Overcapacity

In the world of international shipping, a shift in trends is underway. According to recent reports, year-on-year comparisons suggest that growing overcapacity is putting downward pressure on rates, a stark contrast to the higher rates seen in the trans-Pacific.

Current rates on the Asia-North Europe and Asia-Mediterranean lanes are below the year lows for 2024, indicating that fleet growth is contributing to overall lower rates year on year. This trend is notable, as it contrasts with the increased rates on the trans-Pacific lanes.

One exception to this trend is Vietnam, where volumes are ahead 4.88% year over year. This exception, however, does not seem to have significantly impacted the overall decrease in rates in Europe.

The reduction in rates on the Asia-North Europe and Asia-Mediterranean lanes has seen rates soften from the peak season level of $3,400 per FEU in July and August, falling 7% to $2,841 per FEU last week. Similarly, Asia-Mediterranean prices have decreased, down 2% to about $3,000 per FEU.

Rates from Asia to U.S. West Coast ports were $1,700 per forty foot equivalent unit (FEU), and rates to East Coast ports were $2,700 per FEU. These rates are significantly lower than the West Coast peak season level of $7,000- $8,000 per FEU seen last year.

Golden Week Impact

During the public holiday in China, known as Golden Week (Oct. 1-8), shipping activity typically slows down, as many businesses take a break. This slack period for shipping may have contributed to the lower rates observed during this period.

It's worth noting that shippers often do not honor contracts during Golden Week when spot rates fall below contract rates. This behaviour could potentially impact the rates in the coming weeks.

Blank Sailings and Carrier Orders

Mediterranean Shipping Co. has announced six blank sailings on Asia-Europe services around the week of Sept. 22-28. However, the available search results do not contain information about companies announcing payments for blankings on routes from Asia to Europe or the expected timing of these blankings.

Despite carriers continuing to order more ships, Freightos reports these lower rates. The attack on a tanker in the northern Red Sea by the Houthis, following Israel's killing of the Houthi prime minister in Yemen, indicates the region's volatility. This volatility could potentially impact shipping routes in the future.

In the week starting, daily rates for both lanes have increased by $400- $500 per FEU. Whether this increase is a sign of a reversal in the current trend or a temporary fluctuation remains to be seen.