US freight rates rebound more than 60%? Temporary phenomenon, freight rates will have to fall again

Japan's exports fell for the first time in more than two years, according to new data released yesterday, indicating that the economic recovery is facing heavy headwinds. At the same time, the export data of major Asian trading powers such as South Korea and Vietnam are also very weak and bleak.

In the container freight market, however, a very different story is unfolding. The average spot freight rate for a 40-foot container shipped from China to the West rose 61% to $2,075 in the six weeks ended Aug. 15, according to Xeneta, a Norwegian industry analyst.

Kang Shuchun, president of the International freight forwarding branch of the China Federation of Logistics and Purchasing and CEO of China International Shipping Network, pointed out in an interview with the media that this rate increase is an artificial adjustment by shipping companies, and the unilateral price increase of shipping companies such as Maersk will lead to market chaos in the short term and pull freight costs up, not the market recovery.

Many shipping companies do not have much expectation of higher freight rates. Evergreen Shipping Chairman Zhang Yanyi has said that the current global container market is still in a state of large gap between supply and demand and serious imbalance between supply and demand. Cma CGM also said in its earnings report that market conditions in the transport and logistics industry deteriorated in the first half of 2023, and macroeconomic and geopolitical uncertainties remained full in the second half, with slow global economic growth. At the same time, new deliveries flooding the market are likely to continue to weigh on rates, particularly on east-west routes.

Ocean shipping giants such as Maersk have now reduced supply by halting and slowing ships, effectively depleting capacity. But Philip Damas, managing director of Delury Shipping Consulting Group, said more container ships are expected to come into operation next year. "The wave of overcapacity will definitely affect the global shipping industry. As a result, we are likely to see spot rates resume their downward trend this autumn."

In this case, how long will the shipping company take the initiative to increase the sea freight? Kang Shuchun, president of the International Freight Forwarding branch of the China Federation of Logistics and Purchasing and CEO of the China International Shipping network, believes that the rise in freight will seriously inhibit international trade, resulting in an increase in costs and a subsequent reduction in transactions, and in the case of a reduction in the volume of goods, freight increases are unsustainable. Kang Shuchun predicted that "the price increase behavior of shipping companies will last for about two months, and the freight rate will fall later, if there are no other special reasons and market benefits, the game between shipping companies and cargo owners will soon evolve into a game between shipping companies and shipping companies."