The Shanghai Containerized Freight Index (SCFI), a key indicator for global shipping, has fallen below the 1,000-point threshold this week, signaling the arrival of the traditional off-season for container shipping. Rates on the U.S. West Coast route have plunged for two consecutive weeks, with some quotes approaching the $1,500/FEU cost threshold, while European routes have dipped below $1,000 per forty-foot equivalent unit (FEU). Despite carriers' efforts to reduce capacity through blank sailings, weakening demand continues to drive rates downward.
Market Overview: Rates Decline Across Major Routes
The SCFI dropped 30.32 points this week to settle at 999.92, marking a 2.94% weekly decline. The most significant decreases were observed on trans-Pacific routes:
| Route | Rate | Weekly Change |
|---|---|---|
| Far East to Europe | $707/TEU | -2.08% ($15) |
| Far East to Mediterranean | $1,147/TEU | -3.13% ($37) |
| Far East to U.S. West Coast | $1,696/FEU | -7.98% ($147) |
| Far East to U.S. East Coast | $2,351/FEU | -0.13% ($3) |
The dramatic 7.98% weekly decline on the U.S. West Coast route reflects rapidly cooling demand in North America. Taiwan-origin quotes have fallen from $1,800/FEU to $1,500/FEU, with major carriers maintaining slightly higher rates around $1,650. While the U.S. East Coast route shows relative stability, rates have still decreased from $2,300 to $2,200 this week. European routes have similarly weakened, dropping from $1,400/FEU at the beginning of the month to $900 currently.
Capacity Cuts Fail to Stem Decline
Shipping lines have implemented widespread capacity reductions through blank sailings in an attempt to stabilize rates. However, these measures have proven ineffective against persistent weak demand. Industry sources suggest carriers' planned December 1 general rate increases may face implementation challenges. Nevertheless, shipping companies intend to attempt another round of increases on December 15, hoping to capitalize on potential pre-Chinese New Year demand.
Bright Spots: Australia and South America Routes
Amid the general downturn, select routes have shown resilience. Australia-New Zealand (Melbourne) rates rose $35 to $946 per TEU (3.84% increase), while South America (Santos) rates gained $45 to reach $2,812 per TEU (1.63% increase). These exceptions likely reflect tighter supply-demand conditions in specific regional markets.
Market Analysis: Oversupply Meets Weak Demand
The current rate erosion stems from fundamental market imbalances. Pandemic-era vessel orders are now entering service, creating excess capacity just as post-holiday U.S. demand weakens. Shipping lines now focus on maintaining rates above break-even levels while awaiting potential pre-holiday demand spikes. However, with persistent oversupply and tepid demand, the container shipping market faces continued pressure, suggesting rates may remain depressed in the near term.