Accelerating freight rate erosion

Accelerating freight rate erosion across the major shipping tradelanes is causing analysts to revise predictions of a ‘normalisation’ of the container market.

According to a new HSBC research paper, at the current speed of spot rate erosion, market rates could fall to 2019 levels as early as the end of this year –previous expectations were for mid-2023.

The paper’s authors note that the Shanghai Containerized Freight Index (SCFI), which tracks headhaul spot rates from China, has fallen by 51% since July, representing an average 7.5% weekly decline which, if continued, would crash the index back to pre-pandemic levels.

“We argue that weaker-than-expected demand, faster easing of congestion and price competition to get marginal cargo led to this decline,” said the bank’s analysts.

Based on this backdrop, HSBC’s shipping, ports and Asia transport research team is advancing its “trough scenario”, the bottoming-out point for the industry, to mid-2023, versus the previous estimate of 2024.