Shipping container rates collapse 90% from peaks, Baltic index slumps  

Quantum Commodity Intelligence - Rates for freight containers have collapsed from the peaks of 2022, with the cost of a standard 40-foot box container slumping by around 90% from last year's record highs.

The sharp reversal flags a slowdown in global trade and the broader economy, with many analysts seeing forward freight as a leading indicator, while weak container demand is likely to have a detrimental effect on bunker fuel consumption.   

"Right now, container rates are in the doldrums. The market has corrected massively from where we were a year ago when it cost $20,000 to ship a box from Hong Kong to Los Angeles. That same box now is about $2,000," said Rustin Edwards, Head of Fuel Oil Procurement at Euronav, speaking to a Gulf Intelligence energy markets webinar.

"That basically tells you there is no demand on the consumer side, no pull of goods from Asia into Europe and the US, and there's no overproduction from factories in China that need to push goods out to the gate," added Edwards, indicating that the January oil price rally may have been overdone.

According to freight booking platform Freightos, container rates for the key China-US route peaked above $20,000 last September but are now back at levels not seen since the 2020 height of the Covid-19 pandemic.

Cancellations

Weaker international demand for Chinese goods has also led to a rise in shipping cancellations at the country's biggest ports, putting a damper on the expected economic boost from its emergence from zero-Covid policies, reported the Financial Times.

While cancellations are typical within the industry and usually rise during the Lunar New Year, the supply chains data provider Drewry said the rate is "exceptionally elevated" this year because of a drop in demand in the West.

China's exports have fallen for three consecutive months, while container volumes across the Pacific are down about 30% so far in January compared with last year.

Meanwhile, the Baltic Exchange's main freight index, the key benchmark for vessels carrying dry bulk commodities, fell for a seventh straight session on Wednesday.

The overall index, which factors in rates for capesize, panamax, and supramax vessels, was down 18 points, or 2.5%, at 703, a fresh two-and-a-half-year low.

Separately, the world's two largest container lines are ending an eight-year vessel-sharing agreement as the fierce shipping rivalry over transporting goods heats up.

MSC Mediterranean Shipping Company and Maersk, the number one and two in the container shipping industry by volumes, said on Wednesday that they had agreed to end their alliance in 2025.

The 2015 deal allowed the shipping giants to better manage cargo volumes at a time when the industry faced years of losses and excess capacity.