The recovery in container freight rates is faltering

After a month of steady increases and forecasts of a recovery in the making, container freight rate indices softened last week.

The Drewry composite World Container Index fell 2% to $1,740.26 a feu in the week ended April 27, while the Shanghai Containerized Freight Index (SCFI) fell 3.6% after four-week gains.

In its Global Freight Monitor, HSBC said the decline in SCFI implied an overhang of uncertain demand for container shipping. Noting a General Rate Increase (GRI) for transpacific routes due to go into effect on May 15, HSBC said, “We believe more capacity discipline will be required to maintain freight rates ahead of expectations of a possible sequential recovery in demand through.” Stock replenishments occur in the 2H.”

Drewry said its most recent index reading was 83% below the peak set in September 2021, 35% below the 10-year average and 78% below the same week of 2022. Rotterdam – Shanghai and New York Rotterdam led the freight rate declines down 4% each, followed by Shanghai – Genoa down 3%.

Despite a bad week for rates, Drewry expects east-west spot rates to rise over the next few weeks, except for transatlantic routes.

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

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

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

US-bound containers posted 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 appeared to bottom out on many trades, although Anne-Sophie Fribourg, Zencargo’s VP Ocean, said the transpacific GRI was likely more of a negotiation tactic before contract renegotiations than a sustained effort on pricing increase.

Source: News Network