What causes the slump?
Shrinking demand and “order shortage” spreading globally
During the epidemic, due to the supply chain disruption, some countries experienced a shortage of certain materials, and many countries experienced a “hoarding surge”, resulting in abnormally high shipping costs last year. This year, due to the combined effects of high inflationary pressure in the global economy, geopolitical conflict, energy crisis, epidemic and other factors, the demand for shipping has shrunk significantly, and the inventory market that had been hoarded before can not be digested, which has reduced or even cancelled the commodity orders, and the “order shortage” has spread worldwide.
The market is out of stock, and shipping companies are busy scrambling for goods
Many liner companies have launched new container ships this year, with abundant turnover capacity, but the global demand for shipping space booking is shrinking. In order to grab goods, shipping companies try to leverage the demand with freight, resulting in the phenomenon of “zero freight rate” and “negative freight rate”. However, the strategy of price reduction will not bring any new demand, but will lead to vicious competition and disrupt the order of the shipping market.
This wave of sharp drop in freight rates began in July this year, and the rate of decline increased in September. On September 23, the Shanghai Export Container Freight Index (SCFI) fell to 2072.04, down 10.4% on a weekly basis, about 60% lower than the beginning of the year.
At present, the freight rate from Asia to the West America has plummeted from the high point of 20000 US dollars/FEU a year ago. In the past half a month, the freight rate from the West America has successively dropped below the four barriers of 2000 US dollars, 1900 US dollars, 1800 US dollars, 1700 US dollars and 1600 US dollars!
—Written by Amber
Post time: Dec-01-2022