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SCFI hits 20-month high! Container freight rates again "skyrocketing"?

May 16, 2024|View:14

The SCFI index rose for five consecutive weeks to a new 20-month high.

According to the latest data released by the Shanghai Shipping Exchange on May 10. the Shanghai Export Container Freight Index (SCFI) index rose 365.16 points to 2.305.79 points last week, a weekly gain of 18.82%, marking the first time the SCFI index has crossed the 2.300 level since September 2022. Freight rates on the four ocean routes all rose sharply, by more than 15 per cent.

The Far East to US West route freight rate per FEU rose $791 to $4.393 last week, a weekly increase of 21.96%; Far East to U.S. East Line rates rose $901 per FEU to $5.562. up 19.33% weekly; The Far East to Europe line rose $569 per TEU to $2.869. or 24.74% weekly; Rates per TEU on the Far East to Mediterranean line rose $680 to $3.915. or 21.02% weekly.

On the Into-ocean line, the rate per TEU from the Far East to Kansai in Japan fell $5 from the previous week to $287; The rate per TEU from the Far East to Kanto, Japan, rose $4 from the previous week to $309; Far East to Southeast Asia per TEU rose $55 from the previous week to $362; The rate per TEU from the Far East to South Korea rose $3 from the previous week to $161.

The industry pointed out that despite the delivery of a large number of new ships in the shipping market, the trend of oversupply of transport capacity has not changed this year, but the idle fleet has not increased much, only rising from 0.7% in March to 0.9%, mainly due to the geopolitics of ships diverted around the Cape of Good Hope, resulting in the increase of transport time, European and American traders in response to the longer transport time, so they increase inventory, cargo demand has picked up. Absorbed 5-9% of the space. At the same time, the consolidation companies have imposed comprehensive surcharges to ensure that freight rates can remain above profitable levels. This year, the US line length contract of the consolidation companies has been signed, and the contract price is better than that of 2023.

In addition, China's economic growth in the first quarter exceeded expectations, coupled with the continuous strong consumption power of the United States, the shipping demand will pick up significantly after the May Day Golden Week holiday, container shipping companies slightly increased the proportion of empty flights to nearly 20%, currently a difficult to find, has been full until the end of the month, the overall freight rate is expected to rise again on May 15.

Looking ahead, the industry pointed out that geopolitical risks have a significant impact on freight rates, significantly promoting the rise of freight rates. Freight rates have surged again since mid-April, despite a minor correction after a surge late last year as global shipping lines diverted from the Red Sea to the Horn of Africa to escape the Houthis.

It is analyzed that the freight rate increased earlier than the traditional peak season in the third quarter due to concerns that the normalization of the Red Sea route will be delayed as the Middle East becomes more unstable, including the confrontation between Iran and Israel.

In addition, demand growth due to higher backlogged deliveries on all routes, including the US and Europe, around the May Day holiday in China was also reflected in the freight rate index.