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Container freight rate recovery stumbles

Port of LA Ever Chivalry at Port of LA at sunset
After a month of steady increases and forecasts of a recovery in the making, container freight rate indices softened last week.

Drewry’s composite World Container Index fell by 2% to $1,740.26 per feu in the week to April 27, while the Shanghai Containerised Freight Index (SCFI) slipped by 3.6% after four weeks of increases.

In its Global Freight Monitor, HSBC said the drop in SCFI implied an overhang of the uncertain demand situation for container shipping. Noting a General Rate Increase (GRI) for transpacific routes due to come into effect on May 15, HSBC said: “we think more capacity discipline will be needed to sustain the freight rates before any expectations of a potential restocking-led sequential demand recovery materialises in the 2H.”

Drewry said that its latest index reading was 83% down on the peak set in September 2021, 35% lower than the 10-year average, and 78% lower than the same week of 2022. Rotterdam – Shanghai and New York Rotterdam led freight rate decreases, each slipping by 4%, followed by Shanghai – Genoa, down 3%.

Despite the bad week for rates, Drewry said it expects East-West spot rates to rise over the next few weeks, except for the transatlantic routes.

In mid-April, HSBC noted a slowing in the decline of freight rates since December 2022 and said it expects rates to stabilise around current levels, a statement it repeated on May 2.

“Any further deterioration in freight rates could be short lived, in our view, as it would likely trigger extensive capacity discipline,” said HSBC.

For the second half of 2023, HSBC maintained its expectation that, if consumer spending remains at strong levels, container volumes will find support from inventory restocking in the US.

US inbound containers set a record monthly decline in March, according to Blue Alpha Capital, as US inventories remained at higher-than-usual levels.

Zencargo also noted in mid-April that spot and contract rates looked to be reaching the bottom on many trades, although Zencargo VP Ocean Anne-Sophie Fribourg said the transpacific GRI was likely a negotiation tactic ahead of contract renegotiations, rather than a sustainable effort to raise prices.