This route has become a new highlight of this year
At present, the entire shipping market is gradually normalizing. Due to some recent news, a series of changes are taking place on Russian routes. Russia’s container freight volume this year may reach a record 7 million TEU, becoming a new bright spot in the container shipping market.
Freight in the container shipping market may decline
Shipping lines are concerned about deteriorating trade prospects in the second half of the year as tight monetary policy dampens consumer demand. As for whether there will be a peak season in the container shipping market this year, the industry has not yet determined the direction. The main view tends to be relatively moderate even if there is a peak season. According to Alphaliner, THE Alliance will invest in four new 24,000TEU container ships in phases in July and August to replace the 13,400-19,870 TEU ships on the FE3 route. Moreover, Mediterranean Shipping has recently received several 24,000TEU container ships. This will put more downward pressure on freight rates.
In its Asia Pacific market update in June, Maersk noted that growth in the second half of the year is expected to be much slower than in the first six months. In the logistics business, Maersk is optimistic about growth. Meanwhile, an analysis by analyst John McCown of May container throughput at the top 10 U.S. container ports showed a sharp 21% drop in imports compared to May 2022 as demand fell. He noted it was the eighth consecutive month of year-on-year double-digit decline in US imports. Imports from US East fell 20.7% from the previous year to 897,767 TEU, while imports from US West ports did slightly better, ending a 23-month streak of underperformance, falling only 19.6% to 929,860 TEU.
Russia’s container freight volume to reach record 7 million TEU this year
For Russian routes, TransContainer, Russia’s leading container operator, said a few days ago that this year’s container cargo volume may reach a record 7 million TEU. Viktor Markov, first vice president of TransContainer, said that Far East ports and logistics facilities are still a strong driving force for Russia and its transportation sector, and it has set an average daily target of 6,000 to 6,500 TEU for containers from the Far East, which is twice the current rate.
In some ways, the sanctions imposed on Russia may actually have had some positive impact on its transport and logistics. For example, the average container freight rate from Southeast Asia to Europe and the United States has fallen by nearly 80% from the 2022 high, but this is not the case on the Russian route. Due to the massive evacuation of global shipping companies, freight rates on Russian routes have increased by five to six times. According to this statement, the current freight rate of the Russian route is still maintained at $6,000 to $8,000 /TEU, which is about five times higher than the freight rate before the Covid-19.
Markets have normalized
According to Drewry’s new report, at present, the spot freight rates of the trans-Pacific route and the Asia-Europe route in the container shipping market have returned to the level before the Covid-19, but other routes have not yet fully normalized. As we all know, as of the end of May 2023, the spot freight rate on the trans-Pacific route has dropped by 80% to 84% in the past year. This is a correction to the extremely high freight rates seen earlier. The three major factors driving the soaring freight rates have all disappeared, so spot freight rates quickly returned to pre-Covid-19 levels.
The Drewry World Container Freight Index shows that current rates on the transpacific route are about the same as in December 2019. That is to say, the spot freight rate on this route has been fully normalized. If inflation is considered, the freight rate on this route is lower than before the Covid-19. Spot freight rates on the transatlantic route are different, still 62% higher than before the Covid-19. Freight rates on the transatlantic route had fallen 47% in a year to May and further declines are expected to come.
The whole industry is waiting to see what the freight rate will be in the future. Various sellers and shipping companies are arranging their shipments and shipping plans according to their own judgment. As soon as there is news, it may have an impact on the market trend. After the Covid-19, everyone should change cautiously and take corresponding decisions.
