After 12 weeks of successive spot rate increases, the spot market rates have now declined on a variety of routes.
Drewry’s World Container Index is down a tad, by about 2% from USD$5,937 per forty foot box to USD$5,806. That’s a weighted average of spot rates of eight East-West routes, so your favourite route might be more or less than that. As Philip Damas, Managing Director of Drewry Shipping Consultants points, out, the Shanghai-New York spot rates are still above USD$9,000 for a forty foot box. Meanwhile, the rates from New York to Rotterdam increased 4% by USD$26 to $736 per forty footer, while rates going the other way rose 1% to USD$1,954 per forty footer.
“In Drewry’s view, the $5,937 reading was the peak of the latest upcycle, and rates will now decline,” Mr Damas writes.
That said, the Drewry Container Index is currently up about 268% when compared with the same time last year.
Analysts at Xeneta have a similar view and have called the peak. Noting that the mid-July General Rate Increases haven’t all stuck and Xeneta analyst Emily Stausboll notes that some carriers are now offering lower rates than in previous months. “Crucially, this suggests a growing level of available capacity in the market and shippers can once again start to play carriers off against each other – instead of feeling they need to pay whatever price they are offered to secure space. As the balance of negotiating power starts to swing back towards shippers, we should see spot rates start to come back down.”
Decline driven by supply-demand balance
It appears that there are a few factors are causing the market to peak. Firstly, there is consensus that port congestion – particularly at major trans-shipment hubs is starting to ease. That could be a combination of efforts by ports to get on top of congestion – Singapore put old berths back into use, for example. Analyst Linerlytica points out that waiting times at both Singapore and Klang have dropped to about two days, although it notes that there remain “sporadic” delays. Trans-shipment port congestion may also have been eased somewhat by carriers omitting port calls at congested hubs – Linerlytica points out that Singapore had paid a “heavy price” with box throughput volumes dropping 5% – and carriers have introduced a range of point-to-point services. Carriers have also diversified calls to a range of other ports such as Laem Chabang (Thailand), Cai Mep (Vietnam), and Kaohsiung (Taiwan). There’s also now a general consensus that there is more capacity in the market, at least on the Asia-to-X routes around the world, with Linerlytica commenting that there is a “slew of new services” and extra loaders added.
On the demand side, the supply chain platform Flexport, reckons that volumes are remaining strong both on the Asia-Europe and the Asia North America; meanwhile one of the major global box carriers writes the capacity remains tight on basically all routes.
So, while rates may have marginally declined, it does not look like there is going to be a sharp fall in rates anytime soon, at least not while the Red Sea disruption continues.
Oceania
Australia and New Zealand services to / from the rest of the world remain disrupted due to ongoing major port hub congestion, a increase in demand following the entry into force of the India / Australia free trade agreement, and that total capacity has apparently been reduced as ships are diverted into the higher-volume trade routes.
Newbuildings and demolitions
The market for building new ships, and the market for scrapping old ships, are highly significant in these high freight rate markets. High freight rates tend to cause carriers to hold on to their elderly ships and so the scrap markets tend to go into a downturn. Meanwhile, the shipyards get busy fulfilling orders for new ships as ship owners want to benefit from booming markets.
And that’s exactly what we are seeing now.
As MB Shipbrokers writes of the newbuilding markets: “There are certainly no signs of a summer slowdown in the container newbuilding market, as end users still push to secure slots between 8,000 and16,000 TEU keeping both Korean and Chinese shipyards very busy… As demand for newbuilding slots shows no sign of slowing over the coming weeks, we are seeing major Chinese shipyards like New Times, Yangzijiang and others attracting orders for their new drydocks, which are planned to start operations very late 2026 or from 2027”. Box ships of 2,700 TEU (geared) are reportedly being built for a price ranging from USD$42m (China) to USD$53m (Korea); ungeared ships of 5,400 TEU are being ordered for USD$67m to USD$79m, according to MB Shipbrokers.
Five mid-size, dual-fuel (methanol) vessels (13,000 TEU) have been ordered by ONE for an undisclosed price with delivery due around 2027-2028 and also apparently exercised options for a further five more, Intermodal shipbrokers report.
Meanwhile, on the scrapping side… well, the demolition markets are in a bit of a snoozefest at the moment. Xclusive Shipbrokers of Greece are only reporting four vessels that have been sold for demolition and prices per lightweight tonne are flat and have been so for many many months. “The demolition market remained subdued this past week, impacted by strong freight rates that continue to limit the availability of vessels for recycling,” Intermodal comments.
And that’s this week’s container shipping!
