Freight rate increases slowed down, will freight rates on European and American routes peak in July?

This forecast is mainly based on the fact that the cargo volume of Mediterranean ports is not as large as that of major European ports. For European and American routes, as the number of flights increases, the freight rates are expected to reach their peak after the adjustment on July 1. However, senior executives of European shipping companies believe that although there is still a possibility of freight rates rising, the confidence in future increases is not as strong as in the past, and July will be a key moment to observe market trends.

Some large freight forwarding companies pointed out that the number of ships returning to Asia at the end of June and the beginning of July has increased significantly, and the supply of shipping capacity has increased significantly. In addition, the early start of the peak season may also end early, but shipping companies still stabilize freight rates by controlling cabins. In addition, the problems of port congestion and container shortage still exist, and the negotiations between the two major railway companies in the East Coast of the United States and Canada are not optimistic. It is difficult to say that the freight rates will reach the peak in July.

After all, the shipping market is deeply affected by geopolitical factors, and the current problem of supply chain congestion in the entire shipping industry cannot be solved in the short term. Therefore, although freight rates may stagnate in August, they are expected to remain at a relatively high level. For shipping companies, this trend still holds a positive view on the revenue contribution in the third quarter (Q3).

 A senior executive of another freight forwarding company said that the current shipping market situation is complicated. The situation in the Middle East is tense and there is no sign of easing. Israel has even clashed with Hezbollah in Lebanon, bringing uncertainty to regional stability. At the same time, port congestion is serious. In addition to Singapore and China, the Netherlands, Germany and other places are also facing serious port congestion. In order to cope with insufficient capacity, some shipping companies choose to increase ships, but these ships often operate alone, not shared with other alliance members, and have fewer ports to call at and relatively small tonnage.

Due to factors such as port congestion and detouring the Cape of Good Hope, sailing time has become difficult to control, and natural empty shifts often occur. In addition, the EU's decision to impose tariffs on electric vehicles has also affected the shipping market. In order to avoid potential tariff risks, exporters have rushed to increase shipments before the results of the November survey are released, which has driven up freight rates to a certain extent.

However, there are still some key factors that need to be observed to affect freight rates and stop them from rising or even falling. First, if the EU immediately announces tariffs on Chinese electric vehicles, Chinese exporters may reduce shipments, thereby reducing the push for freight rates. Secondly, the purchasing power of end consumers is also an important factor affecting freight rates. If consumer purchasing power drops significantly, freight demand will decrease, which in turn affects freight rates. Finally, if shipping companies significantly increase their capacity supply, freight rates may also fall.

Despite these uncertainties, there is still room for price increases on July 1. In particular, whether the European route will rise to $9,000 as planned by Maersk and Mediterranean Shipping MSC, next week will be a critical decision moment.

Shipping industry experts pointed out that the SCFI index has risen for 11 consecutive times, and the freight rates of the four major routes and Southeast Asian routes have all shown an upward trend, and prices are close to the highs during the epidemic (see article: Freight rates have risen for 11 consecutive times! The increase in European and American routes has narrowed). It is normal for the increase to narrow or fall, but pay attention to whether the decline has widened. At present, the market generally expects that as long as the Red Sea crisis continues, although freight rates may be corrected, the room for a sharp drop is relatively limited.

Shipping industry insiders believe that the container shipping market faces two potential destabilizing factors that will continue to affect the balance of global container ship supply and demand. First, the continued conflict between Palestine and Israel has blocked the Red Sea route, and the global supply and demand of container ships has reversed. Secondly, the labor-management negotiations at the East Coast ports of the United States have been dragging on for a long time, and the pressure of slowdowns has been increasing, further exacerbating market uncertainty.

In addition, the congestion problem at the Singapore port is also worsening, causing this year's shipping peak season to arrive early and driving up freight rates. Analysts believe that this may mean that the peak season will end early, and the high freight rates are expected to gradually ease starting in September.