Container Freight Index Soars... Shipping Industry Takes a Breather

Shortage of Shipping Space and Rising Freight Rates Leave Small Exporters 'In Tears'
HMM Urgently Deploys 4600TEU Container Ship to Support Exporters

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] The container ship freight index continues to maintain a sharp upward trend. This is due to global shipping companies actively adjusting their capacity despite the demand contraction caused by the novel coronavirus disease (COVID-19).

According to the shipping industry on the 20th, the Shanghai Containerized Freight Index (SCFI), a representative freight index for container ships, recorded 1409.57 as of the 18th. This is an increase of 54.55 compared to the previous week, maintaining the highest level since 2014.

By route, the West Coast of the United States route recorded $3,867 per FEU (a unit referring to one 12m container), an increase of $53 from the previous week. The Mid-America route rose by $100 to $4,634, reaching an all-time high.

The cause of the sharp rise in the freight index is attributed to the proactive supply reduction by each shipping company. Currently, 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.

An industry insider said, "Until the 2010s, shipping companies were competing on each route, making supply adjustment difficult even in situations like COVID-19. However, recently, due to mergers and acquisitions (M&A), the number of shipping companies has decreased, making the market relatively more efficient."

Inside and outside the market, the industry explains that the favorable trend in the shipping industry is likely to continue. Although each shipping company is deciding on additional sailings following the recovery of freight rates, supply has not yet returned to the level of previous years, and the 'push-out' demand ahead of the year-end and New Year in the fourth quarter is just beginning.

However, there are also places struggling with this sharp rise in freight rates. Small and medium-sized export companies are representative examples. They are currently complaining of difficulties as capacity has decreased and freight rates continue to soar. In response, HMM recently decided to urgently deploy a 4,600 TEU (a unit referring to one 6m container) container ship on the route to Los Angeles, USA. This is a direct service between Busan and LA to support domestic export companies.

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