Shipping Industry Sees Container Ship Freight Rates Rebound After 2 Weeks... Expectations for Long-Term Fixed Contracts

[Asia Economy Reporter Dongwoo Lee] The container ship freight index has rebounded after two weeks, showing fluctuations.

On the 7th, according to the Shanghai Shipping Exchange, the 'Shanghai Containerized Freight Index (SCFI)', a global container ship freight indicator, recorded 2884.61 points as of the 5th, rising 22.93 points compared to the previous week. This is a rebound after freight rates, which had fallen from the peak of 2885.0 points on the 15th of last month to 2861.69 points (on the 29th), over two weeks.

The main route, Asia to Northern Europe, was $4,324 per TEU (one 6m container), up $48 from the previous week. The Asia to North America East Coast route freight rose $121 to $4,800 during the same period, and the Asia to North America West Coast route freight was recorded at $4,076 per FEU.

The industry responded that the recent slight rebound in container ship freight rates, contrary to expectations, is exceptional. Generally, freight rates decline as the volume of cargo decreases due to factory shutdowns in China during the Lunar New Year holiday.

However, recent analyses suggest that the prolonged COVID-19 pandemic is acting as a variable in freight rate determination. Due to the impact of COVID-19, congestion is worsening particularly on the Northern Europe and North America West Coast routes. According to the industry, consecutive confirmations of COVID-19 among port workers have caused ships to wait outside ports for their turn to unload. Especially, over 40 container ships are currently anchored waiting at the ports of Los Angeles and Long Beach (LB), exacerbating the congestion.

Looking ahead, the shipping industry expects price increases in long-term fixed contracts (SC). Usually, the unit price for long-term fixed contracts conducted in March to April applies a certain discount compared to spot freight rates at the time of negotiation. In April 2020, when the contract was signed, the average freight rate for Shanghai to the U.S. West Coast was $1,579 per FEU, but recently it has surged past $4,000, showing a steep upward trend.

Researcher Minjin Bang of Eugene Investment & Securities said, "Even assuming the market stabilizes after February, if the pace is not steep until April, a significant increase in SC unit prices compared to the previous year is expected," adding, "This could be a factor that secures a substantial portion of container shipping companies' profits at a high level this year despite uncertainties in the market in the second half."

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