Bright Outlook for Sea Route Freight Rates in the New Year... Shipping Industry Anticipates Improved Performance

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] Expectations for improved performance in the shipping industry, which experienced an unexpected boom last year due to the impact of the novel coronavirus disease (COVID-19), are growing. Signs indicate that the freight rate increase will continue this year as well, following last year.

According to the shipping industry on the 2nd, as of the 31st of last month, the Shanghai Containerized Freight Index (SCFI) recorded 2,783.03, up 141.16 from the previous week. This is the highest level since the related statistics began in 2009, with records being broken weekly.

The upward trend was also steady across shipping routes. In particular, the Europe route surpassed the $4,000 mark. The Europe route was recorded at $4,019, up $294 per TEU (a unit referring to one 6m container), and the Mediterranean route was $4,286, up $577. The industry attributes the sharp rise in the Europe route to the resurgence of COVID-19. As countries reinforce lockdowns again, freight rates are rising.

However, the West Coast of the U.S. and East Coast routes, which had led the freight rate increases, showed a slight decline compared to the previous week, with rates at $4,018 and $4,729 per FEU (a unit referring to one 12m container), respectively.

As freight rates continue to soar, industry expectations for performance are also high. HMM, which set a goal of turning a profit early last year, is estimated to have achieved operating profits of about 800 billion KRW in the previous year, far exceeding its target.

This year’s conditions are also evaluated as favorable. This is due to sustained demand for e-commerce during the year-end and New Year period, as well as ongoing demand for COVID-19 quarantine supplies. After countries worldwide successfully control COVID-19, there is considerable expectation that a full-scale 'revenge consumption' will emerge, boosting cargo volumes. HMM is also anticipating the effects of 'economies of scale' by deploying eight 15,000 TEU-class container ships this year.

An industry official stated, "Since global shipping companies experienced a downturn in the 2010s, they have naturally learned supply adjustment mechanisms. Therefore, even if freight rates stabilize downward in the future, it is unlikely that there will be sudden fluctuations as before."

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