'컨선' Freight Index Soars... Rising Expectations for Performance Improvement ↑

The Dark Horse is the 'COVID-19 Resurgence'

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] The container ship freight index continues its soaring trend. This reflects the full recovery of demand on the trans-Pacific route and the supply control efforts of various shipping alliances and carriers. Centered on HMM, which succeeded in turning a profit after 21 quarters, expectations for improved performance are growing, but long-term prospects remain uncertain depending on whether the novel coronavirus infection (COVID-19) resurges.

According to the shipping industry on the 24th, as of the 21st, the Shanghai Containerized Freight Index (SCFI) was recorded at $1,183.7 per 1 TEU (a unit referring to one 6m container), up 1.3% (15.79 points) from the previous week. This is the highest level not only this year but also since September 2014.

The main driver of this freight rate increase is undoubtedly the trans-Pacific route. On the US West Coast route, the freight rate per FEU (a unit referring to one 12m container) reached $3,440, setting new record highs daily. The US East Coast route also maintains a relatively high level at $3,953 per FEU. Kim Jong-min, head of the Shipping Information Center at the Korea Maritime Promotion Corporation, explained, "As e-commerce volumes increase, cargo volumes heading to the US West Coast route, which is close to Asia, a major production base, are rising. Additionally, the COVID-19 outbreak centered in the US Southwest has caused a surge in demand for quarantine supplies, which is believed to have driven the freight rate increase on the US West Coast route."

Another key reason is that various shipping alliances and carriers are proactively controlling supply. For example, THE Alliance, of which HMM is a full member, continues to reduce capacity on most routes except the North American West Coast route, including Northern Europe, the Mediterranean, the Middle East, and the Atlantic. Particularly on the trans-Pacific route, where previously more than 20 carriers competed making supply control difficult, the number has recently decreased to around nine due to mergers and consolidations among global shipping companies, making the supply control effect more visible.

The industry explains that this soaring trend is likely to continue for the time being, except during the Chuseok holiday. Although carriers are deciding on additional sailings in response to the freight rate recovery, supply has not yet returned to last year’s level. Moreover, the early fourth quarter is a seasonal peak period with rapidly increasing demand in preparation for the US 'Black Friday' and Christmas holidays at the end of the year.

However, COVID-19, which can resurge at any time, remains a potential risk factor. An industry official said, "COVID-19 will likely become a constant risk for the time being," adding, "If border closures, which were frequent at the beginning of the year due to COVID-19 resurgence, recur, moves to drastically reduce supply chains could resume at any time."

This content was produced with the assistance of AI translation services.