Recently, there have been rumors in the global container route market that the US route, the Middle East route, the Southeast Asia route and many other routes have experienced space explosions, which has attracted widespread attention. This is indeed the case, and this phenomenon has also triggered a price rebound trend. What is actually happening?
"Chess game" to reduce capacity
Multiple freight forwarding companies (including Senghor Logistics) and industry insiders confirmed that the main reason for the space explosion is that shipping companies have strategically reduced ship capacity in order to push up freight rates next year. This practice is not unusual at the end of the year, as shipping companies typically seek to achieve higher long-term freight rates in the next year.
Alphaliner's latest report shows that since entering the fourth quarter, the number of vacant container ships worldwide has increased sharply. There are currently 315 container ships vacant around the world, totaling 1.18 million TEU. This means there are 44 more vacant container ships than two weeks ago.
US shipping route freight rates increase trend and reasons for space explosions
On the US route, the current shipping space explosion situation has extended to the 46th week (i.e. mid-November), and some shipping giants have also announced an increase in freight rates by US$300/FEU. According to past freight rate trends, the basic port price difference between the US West and US East should be around US$1,000/FEU, but the price difference range may be narrowed to US$200/FEU in early November, which also indirectly confirms the space explosion situation in the US West.
In addition to shipping companies reducing capacity, there are other factors affecting the US route. The "Black Friday" shopping season and Christmas in the United States usually occur from July to September, but this year some cargo owners may be waiting to see the consumption situation, leading to a delay in demand. In addition, express ship shipping from Shanghai to the United States also affects freight rates.
Freight trends for other routes
Judging from the freight index, freight rates have also increased on many routes. The weekly report on China's export container shipping market released by the Shanghai Shipping Exchange shows that ocean route freight rates have risen steadily, and the comprehensive index has fluctuated slightly. On October 20, the Shanghai Export Container Comprehensive Freight Index released by the Shanghai Shipping Exchange was 917.66 points, an increase of 2.9% from the previous issue.
For example, the comprehensive freight index for export containers from Shanghai increased by 2.9%, the Persian Gulf route increased by 14.4%, and the South American route increased by 12.6%. However, freight rates on European routes have been relatively stable and demand has been relatively sluggish, but the fundamentals of supply and demand have gradually stabilized.
This "space explosion" incident on global routes seems simple, but there are many factors behind it, including the shipping companies’ strategic capacity reduction and some seasonal factors. In any case, this incident has had a clear impact on freight rates and attracted the attention of the global cargo shipping industry.
Faced with the phenomenon of space explosion and price increases on major routes around the world, Senghor Logistics recommend that all customers be sure to book space in advance and not wait for the shipping company to update the price before making a decision. Because once the price is updated, the container space is likely to be fully booked.
Post time: Oct-30-2023
