According to a research report by HSBC, spot freight rates for ocean freight are expected to drop to 2019 levels as early as the end of this year. According to Drewry, a shipping consultancy, the current Composite World Container Index stands at $3,483.19 per 40-foot container, compared to an average freight rate of $1,420 in 2019 (before the pandemic). Although the current sea freight spot price has fallen, it is still 145% higher than in 2019.
At the same time, the report pointed out that the Shanghai Container Freight Index (SCFI) will bottom out in mid-2023, and the profitability of the shipping industry will bottom out in the second half of 2023. The latest container freight index (SCFI) was 1814.00, down 108.95 from the previous period. Most of SCIF’s data comes from large shipping companies and freight forwarders, so we can really feel from this data that the profitability of shipping companies is gradually being squeezed.
For this phenomenon, HSBC explained that the demand in the shipping market was lower than expected, the port congestion was relieved at an accelerated speed, and a small-scale “price war” in the market to attract goods led to a continuous decline in freight rates.
Relevant data show that in early October, container ship orders in the shipping market were close to 7.1 million TEU. A total of 2.34 million TEUs will be delivered next year, compared to 2.84 million TEUs in 2024. The two-year average deliveries are 2.6 times the average of the past 20 years.
With the input of new ship capacity, the relationship between supply and demand in the market will become more tense. In the case of an imbalance between supply and demand, freight rates continue to decline, and HSBC predicts that the profits of shipping companies will drop by more than 80% in the next two years. But as far as the shipping companies are concerned, they expressed that they are not pessimistic about the shipping market next year.
Although many phenomena in the shipping market are predicting that freight rates will return to the average level in 2019, the changes in the shipping market are very large. Shipping companies’ suspension of sailings, cancellation of shipping capacity, and congestion at ports in Northern Europe and the East of the United States, as well as shipments during peak holiday seasons may lead to a “two-level reversal” in freight rates. In any case, suntrmark reminds friends of buyers to make an order plan as soon as possible
