Last week, shortly after China's Lunar New Year holiday, shipping rates fell the most in the past eight years. It is common for rates to decline after the end of the Lunar New Year, which usually results in decreased demand due to the long holiday and the seasonal off-peak period; however, this year, the increased supply appears to have contributed to a larger drop. This year's Lunar New Year holiday ran from Jan. 28 to Feb. 4.
According to the shipping industry on the 13th, the SCFI index on the 7th was 1896.65, a decrease of 7.3% compared to the previous announcement date (24th of last month). This decline is the largest since the SCFI omitted index announcements during the Lunar New Year period in 2018. Although the SCFI index is announced weekly, it has been omitted during the Lunar New Year period since 2018 when cargo volumes are low.
For European routes, the freight rate per 1 TEU (Twenty foot Equivalent Unit; 1 TEU is approximately a 6-meter long container) was $1,805 (approximately 2.61 million won), a drop of 15.9% from the previous announcement. Similarly, the rates for the West Coast and East Coast North American routes were recorded at $4,726 and $4,969 per 1 FEU (Forty foot Equivalent Unit; 1 FEU is approximately a 12-meter container), respectively. This represents declines of 4.5% and 5% compared to the previous announcement.
Industry experts believe that the increase in ship supply has influenced the decline in rates. According to French shipping research firm Alphaliner, the capacity deployed by major shipping companies on the East Asia to Europe route last month was 478,368 TEU, an increase of 9.1% compared to the same period last year. The capacity deployed on the North American routes during the same period also increased by 5.8%, totaling 559,116 TEU.
Analyst Ahn Do-hyun of Hana Securities noted, "This year, global container cargo volume is expected to increase by 3%, while the supply growth rate is anticipated to be 6%. The uncertainty in logistics is expected to ease somewhat since Trump took office, indicating that container shipping rates are likely to trend downward in the long run."