This year, the freight rates on major global trade routes have been on a steep decline. The Shanghai Containerized Freight Index (SCFI), a barometer of the shipping market, stood at a high of 2505.17 points on January 3rd this year. However, by last Friday (the 7th), it had plummeted to 1436.30 points, a staggering drop of 42.67%. Particularly hard-hit were the key routes to the West Coast of the United States, the East Coast of the United States, and South America, with declines ranging between 45% and 54%, resembling an uncontrollable avalanche. Faced with such a severe situation, shipping companies have not been idle and have started to take action!
Specifically, to curb the continuous decline in freight rates, shipping companies have adopted several measures. In addition to reducing sailings by 7% over the next five weeks, they have also implemented strategies such as replacing large ships with smaller ones and postponing the launch of new routes. However, if these measures still fail to stabilize freight rates, shipping companies may further idle their vessels.
According to Drewry's predictions, out of the originally scheduled 715 sailings on the main Europe-America routes over the next five weeks, 47 voyages will be canceled. Among these, 43% of the eastbound trans-Pacific sailings will be canceled, 30% of the Asia-Northern Europe and Mediterranean sailings will be canceled, and 28% of the westbound trans-Atlantic sailings will be canceled.
The latest report from consultancy Linerlytica indicates that shipping companies have begun to take action to curb capacity growth in an effort to reverse the recent decline in freight rates. For example, industry leader Mediterranean Shipping Company (MSC) has confirmed its withdrawal from the trans-Pacific Mustang route and is relocatingits largest 24,000 TEU container ships from the Asia-Northern Europe route to the Mediterranean and West Africa routes. Additionally, the Ocean Alliance has postponed the launch of a new Asia-Northern Europe route originally set for March, while the Premier Alliance is expected to delay the launch of two Pacific routes originally planned for May.
Data from MDS Transmodal shows that shipping companies have made the most capacity cuts on the Pacific routes compared to February, with a reduction of 5% this month. The total capacity in March this year was 1.686 million TEUs, a decrease of 81,000 TEUs from the previous month, but still 16% higher than the same period last year. This is seen as a potential precursor to further significant capacity cuts in the future.
From the end of 2020 to the end of 2024, global container shipping capacity has grown by more than a third, while global freight volume has increased by less than 10%. Industry insiders point out that such a significant increase in capacity can only be partially absorbed by factors such as port congestion, the pandemic, or the Red Sea crisis. With the delivery of new ships, the problem of overcapacity is gradually expanding.
Whether shipping companies will idle their vessels next remains to be seen. Meanwhile, the industry is also concerned that tariff issues could suppress the flow of goods. SCFI data shows that the freight rate for the Europe route was 2,851 percontainer,but by the7th of this month,it had dropped to1,582, marking a decline of 44.51%. On the West Coast of the United States route, the rate per forty-foot equivalent unit (FEU) fell from 4,997to4,997to2,291, a decrease of 54.12%. Similarly, on the East Coast of the United States route, the rate per FEU dropped from 6,481to6,481to3,329, representing a decline of 48.13%.
Foreign aluminum can buyers should formulate coping strategies in advance, focusing on freight rate fluctuation, tariff policy, supply chain stability and exchange rate risk under the background of the current coexistence of Marine freight rate collapse and tariff problems. By optimizing logistics costs, diversifying supply chain risks, renegotiating contract terms, and leveraging digital tools, purchasers can remain competitive and achieve cost control in a complex and volatile market environment. At the same time, paying attention to environmental trends and geopolitical dynamics can also help improve the long-term sustainable development capacity of enterprises.
