European And South American Shipping Rates Plummeted, And The Decline of Many Routes Expanded! Shipping Companies Rapidly Increase The Number of Empty Voyages

As demand continues to weaken, ocean freight rates continue their downward trend. The decline in spot rates of the U.S. West route has narrowed, but the decline in rates of the Europe route and the U.S. East route is expanding.

According to the latest data of Shanghai export container integrated freight index released by Shanghai Shipping Exchange, last week, the Shanghai-Europe route freight rate fell below USD 1,500/TEU. Shanghai port export to Europe basic port market freight rate (shipping and shipping surcharge) was USD 1,478/TEU, down 16.2% compared with the previous period; Mediterranean line freight rate fell 7.2% per week to USD 2,061/TEU; U.S.-West line freight rate fell 2.9% per week to USD 1,632/TEU. The freight rate of Mediterranean line fell 7.2% to USD 2,061/TEU; the freight rate of U.S. West line fell 2.9% to USD 1,632/FEU; the freight rate of U.S. East line fell 13.6% to USD 4,223/FEU.

SSE noted that the recent economic situation in Europe is not optimistic, with a number of manufacturing data below the R&B line, energy prices are at a high level, inflation remains high, the lack of growth momentum in transport demand. North America line due to the Fed continued to take tightening policy to control inflation, the U.S. economic performance recently continued to decline, the volume of cargo performance is weak, the supply and demand fundamentals have turned weak.

In addition, the Persian Gulf route tariff for $ 1650 / TEU, down 8.9% compared with the previous period; Australia and New Zealand route for $ 1006 / TEU, down 16.2% compared with the previous period; South America route for $ 2944 / TEU, down 22.9% compared with the previous period.

As the rate of decline in freight rates accelerated, shipping companies have increased the regulation of space, but the difficulty of holding on to the cost line is becoming increasingly difficult, Alphaliner and other shipping advisory agencies to change the previous forecast, the market is expected to move from normalization to a hard landing, the Far East to Europe seems to be turning to a hard landing. SCFI Europe line freight rates in the past three weeks has been a cumulative decline of 30%.

The industry summarized that the key to reduce the volume of cargo in the demand side, the United States high inventory, high inflation, high interest rates and other three high problems, resulting in a decline in demand, reduced cargo volume, in August this year, the first year-on-year decline in export cargo from Asia to the United States. After that, China's exports to the U.S. fell by 23% and 30% year-on-year in September and October, respectively, and by 6% and 9% compared with the same period in 2019, and it is expected that they may fall again in November.

Looking at Europe, cargo volumes dropped significantly and transport demand was weak due to the ongoing Russia-Ukraine conflict and high inflation and energy prices, which severely depressed consumption. Europe and the United States demand contraction, capacity supply than transport demand is the key to continuous rapid decline in freight rates. Sea-Intelligence predicts that if the global economy is determined to go into recession, triggering a wave of production cuts and layoffs, cargo volumes may face a greater correction at the end of the year.

Large shipping companies such as Maersk, Hapag-Lloyd and Yang Ming have already stated that they will adjust their deployed capacity to match freight demand.

According to Sea-Intelligence report, shipping lines are rapidly increasing the number of empty sailings on trans-Pacific routes due to declining U.S. demand for Asian imports, retailers adjusting their inventories and concerns about a recession next year. In the past two weeks, 50 more blank sailings have been announced on the trans-Pacific route, covering the last 10 weeks of 2022.

Sea-Intelligence said that as of Nov. 4, carriers cancelled 446,756 TEUs of capacity deployed on the eastbound trans-Pacific route in November, representing 17.1 percent of the total 2.6 million TEU capacity, which is up from 195,391 TEUs three weeks ago.

Sea-Intelligence now expects 212,913 TEU of capacity to be removed on the trans-Pacific eastbound route in December, representing 7.7 percent of total capacity of 2.76 million TEUs. Three weeks ago, the agency forecast 60,724 TEUs of capacity to be removed in December.

Sea-intelligence also said shipping lines could announce further cancellations next month if bookings at Asian loading ports disappoint during the peak import season before the Lunar New Year.