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Container Shipping Rates from China to US, Europe Collapse
Wolf Richter www.wolfstreet.com www.amazon.com/author/wolfrichter
“Sluggish westbound volumes have brought about the worst spot market rate collapse that this trade has experienced.” That’s how Drewry Maritime Research summarized it in a report a couple of weeks ago. Since then, the collapse of the rates for shipping containers from China to the West has gotten worse with clockwork relentlessness.
In mid-April, there had already been a lot of handwringing. The Shanghai Containerized Freight Index (SCFI) tracks spot rates of shipping containers from Shanghai to 15 major destinations around the world. At the time, rates from Shanghai to Rotterdam had plunged to $399 per twenty-foot container equivalent unit (TEU), down 67% from a year earlier, the lowest rate ever, and half of what was considered the break-even rate for these routes.
It seemed that there would have to be some kind of uptick – that efforts by carriers to impose higher rates would stick. But nothing worked. So a week ago, there was a lot of handwringing because rates to Rotterdam had dropped to $243 per TEU, which wouldn’t even cover the cost of fuel of about $300 per TEU.
But now, in the week ended June 19, the spot rates from Shanghai to Rotterdam plunged another 15.6% to $205, a previously unimaginable low.
And it’s not just to Northern Europe.
On the routes from Shanghai to the US West Coast, carriers also tried to implement rate increases effective April 1. But after an ephemeral uptick of $300 to $1,932 per forty-foot container equivalent unit (FEU), spot rates re-swooned. By the beginning of May, the index had dropped to $1,783, about back where they had been a year earlier.
But look what has happened since. Last week the index plunged 5.4% to $1,268 per FEU, down 29% from the battered rates at the beginning of May.
Spot rates to the US East Coast are also getting beat up: down 3.3% last week. Of the 15 destinations in the index, rates dropped for 11, remained flat for Taiwan and Hong Kong, and rose for Korea and East Japan.
The overall SCFI dropped 4.3% for the week to its lowest level ever: 556.72. It’s now 44% below where it was during the Financial Crisis, on October 16, 2009, when it was set at 1,000, and down about 50% from February. This is what the terrible plunge looks like:
The phenomenon has impacted other ports and contractual rates, not just spot market rates.
The much broader China Containerized Freight Index (CCFI), which tracks contractual rates along with spot market rates from all major Chinese ports to major destinations around the world, dropped another 3.0% last week, to a multi-year low of 825.97. The China-Europe component plunged 7.9%. Rates to the US West Coast dropped 1.8% and to the US East Coast 0.2%
The CCFI is now 23% below where it was in February, and 17.4% below where it was in 1998, when it was set at 1,000! This is what the chilling trajectory looks like.
The total collapse of shipping rates from China to much of the rest of the world is driven by two factors:
Crummy demand for Chinese manufactured goods around the world, a result of lackadaisical economic growth, if any, in the developed markets.
And a breath-taking and ballooning oversupply of ships to transport these goods. The resulting losses for carriers have sent executives to tear out their hair. But not everyone is screaming.
The largest carriers, fueled by cheap money central banks have made available, are purposefully adding enormous capacity to drive up their market share and destroy the price so that smaller carriers with less money to blow would be forced to exit the market, allowing the top carriers to build a global shipping oligopoly.
“I don’t think it will backfire,” explained Nils Andersen, CEO of the Danish giant A.P. Møller-Mærsk, whose Maersk Line is the largest container carrier in the world. Read… Top Carriers Wage Price War to Form Global Shipping Oligopoly
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I'd like to see the chart go back to 2006.
What were the rates like before the GFC?
Im in the shipping industry & see all the vessels named above & more & the quayside has been thinning out of late, as have the teu velocity & hours vessels spend on the quay.
As an example, we had a large mearsk in only last week, all done in 4 hours, the norm is 1-2 days roughly. low wages= low demand
Also the British Ports take in full boxes & send back empties, as an example of the lack of any meaningful manufacturing in the UK.
Its all part of Agenda 21 "the de-industrialisation of the west" by the Jewish Zionist f*ckers.
Depopulation by starvation & deflation of the world economy & their plans are in the endgame now!
when do used containers go to $100?
American rail cos. should see a collapse of container shipments as well then. Maybe someone can deliver the stats on that.
obviusly with the Euro so low, exporters to the EU are having a hard time, while rates to the US went up at the beginning of the year on the strong dollar as Wallmart rushed to import years worth of cheap merchandise from china.
Let the bastards fill their own landfills with that junk.
Our economy is easy to shrink I think.
Baltic Dry Index seems to have moved upward from it's all time lows in recent weeks.
It hit 513 at it's nadir, it reads 779 today.
779 is still way off it's all time high 1,484.
seasonal bump.. won't last
Collapse or corrapse?
“I don’t think it will backfire,” explained Nils Andersen, CEO of the Danish giant A.P. Møller-Mærsk, whose Maersk Line is the largest container carrier in the world. Read… Top Carriers Wage Price War to Form Global Shipping Oligopoly"
So...you want to be top dog among a government-fueled effort to reduce shipping business competition from China, who's struggling to cope with fewer shipments to diminishing western demand?
You have some magic elxir to stimulate western demand that their own central banks haven't thought of?
Even if reduced competition enhances shipping rate stability, and prices, you're still in decline without an increase in western demand.
I know, I know...you think that's temporary. When it all fires up again, you'll make a killing...I know.
Except it's been temporarily declining for several years now...
That's not temporary.
That's the future.
Like oil, it's mostly a demand thing...not a supply thing.
m
A lot of people believed this would happen we just don't have the timeline. The middle class has been hammered with no wage increases or wage increase less than inflation and less benefits for the last 20 or 30 years. Sooner or later the buying power of the middle class would get low enough to bring the economy to a halt. I saw it where i worked. We get a 2% raise while the CEO gets a 5 million dollar bonus plus a raise. Can't do much about it but change jobs where you will get the same BS again. I don't see it ever coming back but I am just one guy.
100% correct. It is all about demand. The Fed has been pushing on a rope since 2008, when demand collapsed, and it has not returned overall. Oh, there is plenty of pent up demand. Problem is, there isn't much pent up money sloshing around in the bank accounts of consumers. Then, there are the changing demographics as baby boomers desperately try to save for retirement and to downsize at the same time. This, while their kids and grandkids try to find decent jobs.
I know we get branded as conspiracy nuts here, but it truly is hard to believe we elect so many morons that they could allow things to be screwed up so badly. If things have been so clear to a nobody like me for so long, the raping of America could not be an accident. You have to really work at it, and have a lot of help, to get an economy so totally FUBAR.
Maersk already has huge market share and yes they are cunts. Fuck Maersk
wait a minute, aren't the moronicans in a recovery?
...and ...and the europeans are making money hand over fist, the RU sanctions having no effect.
FUBAR
american spirit joe tyme, ha...
have a spendid day "folks", ha...
i prefer floating terds swirling the drain hole, the black vortex of fiat/debt valuations...
so that smaller carriers with less money
The floating Wal Marts of the ocean wipe out the small fry. Now we know where all those FEMA camps will be located.
some call it deflation or the result of money printed creating excess production. hmmm, bubble tyme, tic toc.
let us lower rates to ramp this bitch to da moon. fucking dolt ass idiots- end the reserve.