Marine carriers reduce capacity, but ocean rates continue to fall

According to Sea-Intelligence, after the Golden Week festival in China, marine carriers have reduced trans-Pacific vessel capacity by 26-31% for three weeks through the cancellation of sailings, and by 19-27% on routes from Asia to Northern Europe.

But all the same, freight rates on the key transcontinental transport corridors along the West-East route continue to decline. Sea-Intelligence sees the reason behind this in the fact that the scale of increase in capacity during the corona crisis was such that even such a sharp reduction, at most, brings the capacity to 2019 levels.

According to Sea-Intelligence analysts, the actual capacity will exceed 2019 levels on average in 41-43 weeks:

  • on Asia-North America West Coast shipping routes – by 1.9%,
  • Asia-Atlantic coast of the USA - by 3.1%,
  • from Asia to the ports of Northern Europe – by 5.1%.

The only routes of the main world’s transoceanic trade routes, where the actual supply of carrier capacities is lower than in 2019, are the routes from Asia to the Mediterranean Sea ports (-1.3%).

At the current rate of decline, spot rates could reach pre-pandemic 2019 levels later this year, according to the HSBC report. Bank analysts note that the value of the Shanghai Containerized Freight Index (SCFI), which focuses on Shanghai export container transport market spot rates, has fallen by 51% since July, i.e. each week the index value decreased by an average of 7.5%. If this dynamics remains more or less unchanged, the index value will reach pre-corona crisis levels very quickly.

The authors of the report note that a slowdown in container and vessel demand, much reduced port congestion level and price competition to attract cheaper cargo led to the speeded-up fall in rates.