Drop in Soaring Maritime Freight Rates Amid China's Power Shortage Crisis

US-China Container Freight Rates Down 22% in a Month... Shipment Volume Declines Due to Power Restrictions
Global Maritime Freight Outlook Diverges

[Asia Economy Beijing=Special Correspondent Jo Young-shin] China's power shortage has brought down the soaring maritime freight rates. The power transmission restrictions due to coal inventory shortages in China and the resulting decline in manufacturing production appear to be the turning point for maritime freight rates.

Chinese media such as Huanqiu Shibao and Securities Daily cited Baltic Container Freight Index (FBX) data, reporting on the 12th that as of the 8th, the 40-foot (FEU) container freight rate on the China-US (West Coast) route was $16,004. This is a 22% decrease from the $20,586 freight rate a month ago. The freight rate on the China-US (East Coast) route also fell 12.4%, from $22,173 to $19,421.

Photo by Global Times Capture

At the beginning of the year, the container freight rate on the China-US (West Coast) route was only $4,222 per FEU, but it surged to $20,586 last month. With container freight rates rising nearly fourfold compared to the start of the year, there were concerns that maritime freight was fueling inflation.

Securities Daily explained that the decline in shipments from export companies due to power restrictions in the eastern coastal regions of China and the announcement of freight rate freezes by global shipping companies such as Maersk and CMA-CGM caused maritime freight rates to turn downward. Securities Daily also analyzed that China's power shortage led to a simultaneous drop in the resale prices of shipping capacity by logistics companies, which had been showing speculative behavior.

Bo Won-shi, Chief Analyst at China's IPG, explained, "The decline in freight rates was caused by a decrease in container demand due to reduced shipments from manufacturers caused by domestic power transmission restrictions and the overlap with the National Day holiday period (October 1-7). The improved turnover rate of empty containers was also a factor in the freight rate decline."

[Image source=Yonhap News]

However, the prevailing opinion is that it is necessary to closely monitor market conditions to determine whether maritime freight rates will continue to decline.

There is a possibility that container demand will increase again due to the fact that Chinese manufacturers did not ship during the National Day holiday period and the upcoming Christmas season.

Additionally, the inefficiency of overseas port terminals caused by COVID-19 and the still high international raw material prices are also cited as factors that could cause maritime freight rates to rise again.

On the other hand, since China's power shortage cannot be resolved in the short term and the Singles' Day (November 11) domestic demand is concentrated at this time, the forecast that export container freight rates will show a downward trend for the time being is gaining credibility.

Huanqiu Shibao stated that while the decline in maritime freight rates is an encouraging sign for both the Chinese and global economies, due to ongoing congestion at US ports and mismatches between container demand and supply, maritime freight rates are likely to remain at high levels until early next year.

Meanwhile, Chinese Premier Li Keqiang, presiding over a meeting of the National Energy Commission the day before, instructed to revise uniform power restriction measures and power usage campaigns to ensure the stability of power supply. Premier Li also emphasized that while 'carbon neutrality' is a task to be upheld, coal should be phased out in an orderly manner, and that oil and shale gas exploration and development should be expanded along with strengthening storage capacity.

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