International Container Shipping Rates Plummet

Cargo is loaded onto ships in the Port of Melbourne, in Australia, on Sept. 9, 2021. William West/AFP via Getty Images

International container shipping rates have plummeted more than 60 percent year-over-year, with industry insiders citing the decline in global cargo volume as the main reason, as well as the shipping market gradually recovering from the pandemic.

According to the Drewry World Container Index, a UK-based maritime research and consulting service, the composite index for 40-foot containers was $4,472 on Sept. 22, down 10 percent from a week earlier and 57 percent from its peak of $10,377 in the same period in 2021. This is the 30th consecutive week of declining rates.

Among several traditional ocean routes, Drewry assessed spot rates for 40-foot containers. The largest decreases were seen on the route from China to the Western United States, with Shanghai to Los Angeles at $3,779, down 70 percent year-over-year, followed by the route from China to Europe, with Shanghai to Rotterdam at $6,027, down 58 percent year-over-year.

Even with a 60 percent drop, the combined index of $4,472 is still more than 20 percent higher than the average five years ago of $3,704. In other words, current shipping rates are still higher than before the COVID-19 outbreak. However, Drewry expects the index to continue to fall in the coming weeks.

The index takes time to calculate and collect data, so it may lag a little behind the actual real-time situation. A freight manager in China told The Epoch Times on condition of anonymity that the 40-foot container rate from Ningbo to Los Angeles had dropped to $1,800, down 86 percent year-on-year, while the 40-foot container rate from Ningbo to Rotterdam was at $4,400, down nearly 70 percent year-on-year. The ports of Ningbo and Shanghai are very close, and the container export rates between the two ports are essentially the same.

Rates for some small feeder routes fell even more, such as from China to Vietnam and China to Thailand, where the freight rates can be zero or even negative if fuel surcharges are deducted. The manager explained that shipping companies would rather lose money than stop shipping because their rationale is that there is still a chance to turn things around in the future. But once a shipping company leaves the market, other companies will take advantage of the gap. This kind of thinking has actually led to quite an unhealthy competition, he said.

Cargo Volume Drops as Pandemic Ends

Another manager of a Chinese container shipping company that has been in business for nearly 30 years also spoke to The Epoch Times on condition of anonymity, saying the drastic decrease in container shipping rates was caused by several factors, including a reduction of demand in the market.

With the current global economic depression, soaring inflation, and higher interest rates, trade and economic activities worldwide have decreased, he said. In addition to the uncertainty of the Russia-Ukraine war, investors are cautious. Consumers are also prioritizing their spending mostly on essentials.

Furthermore, the huge price increases in the past two years were mainly due to the pandemic, he said. But now, with the pandemic nearing its end, prices have stabilized. For example, during the pandemic, many companies feared that their industries would be cut off from supply chains, and they, therefore, increased their purchases. But this is no longer necessary. Countries worldwide have also resumed their own production.

Walmart, the world’s largest retailer, said last month that it had canceled billions of dollars in orders to keep storage levels in line with expected demand. Target, the second-largest U.S. retail giant, also canceled $1.5 billion in orders in August to clear its stored goods.

Port inefficiencies that led to a supply chain crisis during the pandemic are also much less of an issue now. The latest Ocean Timeliness Index from global logistics platform Flexport shows that on the Asia-North America route, the average time from the source factory to the port of destination was 84 days, down 30 days from the January peak; and on the Asia-Europe route, the corresponding time averaged 95 days, down 27 days from its April peak.

New Cargo Ships

During the year-long surge in freight rates, the world’s major shipping companies have placed orders for new ships. Among them, the Mediterranean Shipping Company (MSC), headquartered in Switzerland, placed the largest order. So far this year, the company has ordered 48 new vessels in a few months, totaling 446,400 Twenty-foot equivalent units (TEU). This makes MSC the world’s largest container shipping company, surpassing Maersk of Denmark. CMA CGM S.A., the world’s third-largest container shipping company, has also ordered ten 7,900 TEU container ships in South Korea and six 15,000 TEU container ships in China this year.

According to China’s Caixin Media, China COSCO Shipping and its subsidiary OOCL, the world’s fourth largest carrier in terms of capacity, has placed four cargo ship orders since the pandemic, with a total of more than 32 new vessels. The first 12 new vessels ordered by OOCL in 2020 are expected to be launched from 2023 to 2024.

However, a recent report by HSBC Global Research predicts that container shipping will see an inevitable downward cycle from 2023 to 2024, driven by overcapacity, with profits possibly falling by 80 percent.