At the current rate of tariff reduction in the market, a drop in freight rates to 2019 levels could be as early as the end of this year compared to previous forecasts of mid-2023, according to HSBC.
Tracking spot rates from China, the Shanghai Container Freight Index (SCFI) has fallen 51% since July, with an average weekly drop of 7.5%, and is likely to continue. It will bring the index back to pre-pandemic levels.
“We think weaker-than-expected demand, faster-than-expected congestion, and price competition to acquire goods have led to this decline,” the analysts said.
The paper said there was “a lot of downside risk” to earnings in 2023 and 2024, so the bank cut its earnings estimate “up to 51%” and slashed its dividend expectations.
According to HSBC, capacity reactivation after the Golden Week holiday will be one of the “key reflections” to determine “whether rates will stabilize soon.”
However, banking analysts say shipping lines will be forced to take “drastic action” if rates drop too low levels, adding that “capacity adjustments will appear to be meaningful.”, especially when rates fall below cost.”
Congestion at Nordic ports and two eight-day strikes at Port Felixstowe were not enough to prevent a “significant” 49% fall in the China-Northern SCFI index in Q3, according to Alphaliner. The newspaper reported that it counted 687 vessel calls in the third quarter at the Northern port, including 18 services of alliances: 6 by 2M, seven by Ocean Alliance, and five by The Alliance – 140 fewer than that. With the previous advertisement.
The 2M alliance canceled up to 26% during this period
The 2M alliance MSC and Maersk recorded less than 15%, and Ocean Alliance members 12%, which previously maintained the most calls, canceled up to 26% during this period. “It should come as no surprise that the port of Felixstowe experienced the highest percentage drop in shipments from the Far East in the third quarter,” Alphaliner said. Port Felix has lost more than a third of its scheduled arrivals, while Rotterdam, Wilhelmshaven, and Zeebrugge are the primary beneficiaries of these transfers.
Reported by Lucy 2022-10-31
