Are international shipping companies creating an empty container crisis to raise freight rates?

The freight forwarder, who asked not to be named, claimed that carriers are taking advantage of the market sentiment ahead of the Lunar New Year in the hope of maintaining or increasing freight rates after the Chinese holiday in February.

"Chinese New Year is coming soon, so all cargo planned to depart before the Lunar New Year must be booked now," the freight forwarder said. "These shipping companies are artificially creating demand, but because the actual demand does not exist, the stability of the shipping companies' transportation routes is threatened."

According to the freight forwarder, market demand is slowing down significantly while costs are rising. But he stressed that this was very different from what the shipping company claimed. Specifically, rerouting a 20,000TEU ship to the Cape of Good Hope will incur additional costs of up to $1 million per day, but only $50 per TEU per day, and the entire 14-day rerouting cost is only $700.

Even with only a small increase in costs, carriers are still charging around $5,000 per FEU from Asia to Northern European ports, according to the freight forwarder.

Initial attacks in the Red Sea in November and December stoked market uncertainty, causing freight rates to rise far more than costs. However, shipping consultancy Drewry predicts this uncertainty will gradually subside as the first rerouted ships arrive at European ports.

Drewry analyst Simon Heaney commented: “Based on current feedback, February bookings are not tight...given the capacity situation, although there are concerns that there may be problems, shipping boxes back to Asia and Not a big problem. Also, Chinese manufacturers are ramping up production, which will help ease concerns about shortages."

At the same time, Hong Kong consulting firm Linerlytica believes that freight rate increases have "peaked" and shipping companies are currently facing the off-season after the Spring Festival. Heaney pointed out: "Since the end of November, the Shanghai Container Freight Index (SCFI) has risen for eight consecutive weeks, with a cumulative increase of 126%, but the current weekly increase has slowed down."

Still, the consultant claimed that "freight rates are expected to maintain most of their recent gains after the Spring Festival holiday as shortages of ship capacity and container equipment will continue." Clearly, there are differences of opinion within the analyst community, but that's not unusual. Even indices struggle to agree, with the China Containerized Freight Index (CCFI) reportedly showing spot rates from Shanghai to Europe falling 2.4% last week.

Either way, unless the market takes another hit, the $12,000/FEU rates some industry observers have predicted over the past few weeks appear unrealistic.

Heaney believes that due to some operators turning off AIS equipment, the number of sailings around the Cape of Good Hope has increased, which masks the fact that accurate statistics cannot be collected. However, Linerlytica pointed out that new ships are being launched every week, with 36 new ships put into operation in the past 10 days, which will help alleviate capacity constraints caused by long-term voyages.

However, the current situation remains uncertain. "A variety of new surcharges have emerged related to the Red Sea and Suez crises, including transport disruption surcharges, emergency operations surcharges and emergency adjustment surcharges, to name just three," Heaney said.

“For shippers, it’s a confusing wordplay about fees, and they don’t know what the basis and criteria for these surcharges are,” he stressed.