The latest market update by Linerlytica, citing the latest CoFIF EC contracts traded on the Shanghai International Energy Exchange (INE), states that freight rates are poised to fall by over 70% by June next year.
According to the market update, carriers in the container shipping industry are struggling to counteract the persistent decline in freight rates, with the Shanghai Containerized Freight Index (SCFI) experiencing a significant drop of 5.6% last week.
Linerlytica says the decline was predominantly driven by sharp reductions on the Transpacific and Middle East routes, signalling ongoing volatility in the global shipping market.
SCFIS signals a continuous downtrend
The Linerlytica market update adds that the Shanghai Containerized Freight Index for Spot (SCFIS), which provides a more accurate reflection of actual market spot rates, has been on a downward trajectory since its peak in July, particularly concerning the US West Coast.
This trend, says Linerlytica, contradicts the SCFI’s earlier false signal of a rate rebound, which occurred the previous week. Since July, cumulative losses in freight rates have reached 38%.
Mixed market outlook amid potential disruptions
According to Linerlytica’s market update, the outlook for the next four weeks remains uncertain, with mixed expectations among market participants.
“The outlook over the coming 4 weeks is mixed, with carriers hoping that the diversion of cargo away from the US East Coast ahead of the potential port labour disruptions in October could provide a boost to the market. The short lived Canadian rail strike at the end of last week did not result in any material increase in port congestion although US PNW ports are struggling to cope with increased inbound rail volumes while the PSW ports remain largely free of congestion. Freight futures continue to weaken, with North Europe rates trading at a discount of over 70% to current spot rates,” says Linerlytica.
Freight futures suggest lower rates to come next year
The most eye-opening fragment of the market update was arguably the section on freight futures, with Linerlytica stressing that rates for North Europe are trading at a discount of over 70% compared to current spot rates.
Moreover, the latest Container Freight Index Futures (CoFIF EC) contracts, traded on the Shanghai International Energy Exchange (INE), predict a drop in container freight rates of over 70% by June next year.
“Although the drop is not as severe as the freight rate collapse seen at the end of 2022, current freight futures prices anticipate continuous declines over the coming 12 months, with no rebound expected at the end of this year and no repeat of this year’s post Chinese New Year rate rally in 2025,” reads Linerlytica’s market update.
The update concludes by adding that last week, the SCFIS also recorded a significant 7.3% decline in rates to North Europe, overshadowing the relatively modest week-over-week declines of 1% to 3% observed over the past month.
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