Market Overview
The latest update from Linerlytica, based on the CoFIF EC contracts traded on the Shanghai International Energy Exchange (INE), suggests a substantial decline in freight rates is imminent. The forecast indicates a potential drop of over 70% by June 2025, reflecting significant shifts in the global shipping market.
Current Trends in Freight Rates
Shanghai Containerized Freight Index (SCFI): The SCFI, a key benchmark for container shipping rates, experienced a notable decline of 5.6% last week. This drop is largely attributed to decreased rates on the Transpacific and Middle East routes, highlighting ongoing volatility in shipping rates.
SCFI Spot Index (SCFIS): The SCFIS, which provides a more accurate snapshot of current market spot rates, has been declining since its peak in July. This is particularly evident in rates to the US West Coast. The cumulative losses in freight rates since July have reached 38%, signaling a persistent downtrend despite previous indications of a potential rebound.
Future Outlook
Freight Futures: Linerlytica’s update reveals that freight futures for North Europe are trading at a discount of over 70% compared to current spot rates. This suggests a continued decline in freight rates over the coming months.
CoFIF EC Contracts: The latest Container Freight Index Futures (CoFIF EC) contracts predict a significant reduction in container freight rates of over 70% by mid-2025. This forecast indicates a bearish outlook for freight rates, with no anticipated recovery by the end of this year or a repeat of this year’s post-Chinese New Year rate rally in 2025.
Mixed Market Sentiment
Market Uncertainty: The outlook for the next four weeks remains uncertain, with mixed expectations among market participants. Last week’s data showed a substantial 7.3% decline in rates to North Europe, overshadowing smaller declines observed over the past month.
Key Takeaways
Continuous Decline: The forecasted drop in freight rates reflects ongoing challenges in the shipping industry, with current trends suggesting a prolonged period of lower rates.
Impact on Carriers: Container shipping carriers are facing difficulties in countering the decline, impacting their financial performance and market stability.
Market Reactions: The significant discount in freight futures prices highlights market expectations for continued rate reductions, with little hope for a near-term rebound.
Overall, the shipping industry is bracing for a challenging year ahead, with substantial declines in freight rates anticipated to continue through 2025.
