Container rates ex-China dip – just a glitch, as demand stays strong

A minor 3% drop this week in the Drewry World Container Index (WCI), continuing a trend which began last week.

Shanghai-US rates were the fastest to dip: Shanghai-LA from a peak of $7,512 in early July to $6,501 yesterday; and Shanghai-NY from $9,612 on 18 July, to $8,931.

This could be little more than a glitch in an otherwise inexorable rise in rates, akin to that seen in the WCI in Q1, which soon reversed.

Indeed, according to Linerlytica, the port of Shanghai recorded a spike in congestion at the end of July not seen since the beginning of the year, which rather implies there there could be more disruption to come.

Softness in the charter market is not to be regarded as an indicator, said Alphaliner, but rather a typical summer holiday slowdown with “no sign of an acute market weakness”.

Qatar, Egypt and the US are pushing for Israel-Hamas ceasefire talks to resume on 15 August, but there is not much reason to imagine this will amount to much. And if the war is not going anywhere, neither are the Houthis: over the past 24 hours, Greek-owned tanker Delta Blue came under a hellish sequence of attacks from RPGs, missiles, drones and later a drone boat, according to a UKMTO report.

“Combined with supply chain problems, geopolitical uncertainties, and a stronger-than-expected cargo demand, freight rates will remain strong for a while, holding up charter rates as well,” Alphaliner reported on Wednesday.

If the downward trend does continue, however, it will be a sign that efforts by US shippers to front-load volumes to avoid being thrown upon the mercies of peak season, have worked. This certainly seems to be the prevailing consensus at Xeneta.

Chief analyst Peter Sand said yesterday the continuing Red Sea crisis had “brought a major shift in the traditional seasonality of ocean supply chains, with concerned shippers rushing to import as many goods as they can, earlier in the year.”

Xeneta data shows that record cargo volumes, of 800,000 teu, were shipped from Asia to Europe in June, the most in a single month. China-US volumes, meanwhile, were the eighth-highest on record, at 1.36m teu, not seen since the pandemic.

The record number of containers shipped in June gives credence to Xeneta’s theory of a shifting peak season.

“Shippers assessed the impact of the Red Sea conflict on ocean supply chains and are not prepared to take the risk of repeating the chaos of the pandemic years,” said Mr Sand.