Currently, the globalMaritime Transportationmarket is undergoing a series of significant changes, primarily reflected in freight rate fluctuations, overcapacity, and adjustments in competitive dynamics. The latest Shanghai Containerized Freight Index (SCFI) shows that on August 2, the index dropped by 115.2 points to 3,332.67, a weekly decline of 3.34%, marking four consecutive weeks of decline. Notably, freight rates on the US West Coast route have fallen by around 6% for three consecutive weeks, while declines on the Mediterranean, US East Coast, and Europe routes have also widened, at 5.18%, 2.21%, and 1.68%, respectively.

Over the past month, the SCFI has fallen by over 400 points, a decline of 10.74%. Industry insiders note that the speed and magnitude of the decline reflect the intensity of competition in the shipping market. However, given the market share and customer retention of alliance shipping companies on east-west routes, despite the drop in freight rates, these companies can still maintain high profitability.

Sharp decline in US West Coast freight rates

Specifically, the US West Coast route, with its high vessel turnover and no need for detours, has become a focal point for competition among shipping companies. Not only have alliance shipping companies continued to deploy additional capacity through extra sailings or new routes, but non-alliance companies have also entered the fray, intensifying price competition. Some non-alliance companies have even slashed rates to around $4,000 per FEU (40-foot container), forcing alliance companies to adjust rates slightly in response, further squeezing profit margins.

Pressure on Europe and Mediterranean routes

Meanwhile, the Europe and Mediterranean routes have not been spared from the wave of declining freight rates. Alliance shipping companies have similarly increased capacity through extra sailings or new routes, while non-alliance companies have continued to enter the Mediterranean market, exacerbating downward pressure on rates. Since August, companies like Mediterranean Shipping have deployed extra sailings or new routes to the US East Coast, with the impact of falling rates quickly becoming apparent.

Challenges of global overcapacity

Another major challenge facing the shipping industry is the potential for overcapacity in the second half of the year. According to Alphaliner, global capacity has reached a record high of 30,385,045 TEU. Although freight rates have softened, shipping companies still maintain considerable profitability compared to the earlier surge in rates.

Current market freight rate situation

On July 25, UK-based maritime consultancy Drewry noted that container shipping rates had peaked. The market reacted swiftly, and by noon on August 1, major freight forwarders reported that the latest rates for the US West Coast route had dropped by $200 per FEU, while the US East Coast route saw a $300 reduction. However, by evening, shipping companies announced adjustments to the reductions, now at $500 per FEU. This adjustment reflects intense market competition.

According to freight forwarders, since July, non-alliance container shipping companies have re-entered the US West Coast market, offering highly competitive rates as low as $4,800 per FEU, undercutting alliance members by over $1,400. Under market pressure and the low-price strategies of non-alliance companies, alliance vessels have had to increase rate reductions to adapt to market changes.

As of August 1, the latest rates for the US West Coast route ranged between $5,700 and $6,000, while the US East Coast route dropped from $9,700 to $9,200. Rates for the Europe route remained relatively stable at around $8,600. The decline in rates is attributed not only to growing capacity but also to improved congestion at major international hub ports. Drewry reported that most Asian container terminals are no longer congested, with only Los Angeles and Long Beach facing congestion in the US, while major Northern European ports still encounter challenges.

Potential for freight rate increases by shipping companies after mid-August

Industry insiders noted that container shipping rates may continue to decline this week, with relative stability on the US East Coast and Europe routes due to weather-related delays near the Cape of Good Hope. With expected growth in seasonal orders, shipping companies may consider rate increases after mid-August.

The current decline in freight rates can be attributed to three main factors: first, after 13 consecutive weeks of significant rate increases, the market needed a correction to adapt to demand changes; second, smaller shipping companies on the US West Coast route have used low-price strategies to capture market share; and third, demand in the Asia region did not significantly improve in July, partly due to a surge in shipments in June, leading to a continued decline in rates.

Expectations for future market demand

A prominent logistics expert stated that demand is expected to recover in August, with contract rates for Far East to Europe and US East Coast routes outperforming spot rates, indicating tight supply-demand dynamics. Recent observations show increasing export volumes, with several shipping companies planning to implement GRI (General Rate Increase) and peak season surcharges in August, ranging from $1,000 to $2,000 per FEU. These additional charges further highlight the imbalance in market supply and demand.

Dynamic adjustments in the global shipping market

The shipping industry widely believes that global container shipping has entered its traditional peak season, but the market still faces shortages of containers and vessels. The slight adjustments in rates for US East Coast and Europe routes reflect ongoing supply-demand tensions. The Far East to US West Coast route, with its high rates, has attracted regional operators using smaller vessels, further accelerating the decline in rates. Currently, the global shipping market is in a phase of dynamic adjustment, with rate fluctuations, overcapacity, and competitive shifts shaping its future trajectory.

The SCFI on August 2 showed the following rates: Far East to Europe at $4,907, down $84 (1.68%); Far East to Mediterranean at $4,997/TEU, down $273 (5.18%) from the previous week; Far East to US West Coast at $6,245/FEU, down $418 (6.27%); Far East to US East Coast at $9,346/FEU, down $211 (2.21%); Persian Gulf route at $2,217 per TEU, down $2 (0.1%); and South America (Santos) route at $7,867 per TEU, down $72 (0.9%).

In conclusion, the global shipping market is undergoing profound changes in freight rate fluctuations and competitive dynamics. Although rates are currently declining, anticipated demand recovery and seasonal order growth may drive rate increases after mid-August. Shipping companies and freight forwarders must closely monitor market trends and adapt strategies flexibly to navigate the evolving environment.