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Cape of Good Hope diversions cause freight rates to soar, in stock prices to fall
Jan 29,2024
The massive diversion of container ships near the Cape of Good Hope in Africa has led to a spike in in stock prices, but the impact of the Red Sea has a limit and may have been reached.
The upward momentum has abated. Rates have leveled off in most waterways. Several major European stock indexes have fallen.
Jefferies Shipping AnalystOmar Dot"Freight rate pressures into Europe continued to ease from their highs, but freight rates in other regions remained firm," it said on Friday."
The rate dynamics now are very different from those during the pandemic boom. The supply chain crisis of 2020-2022 is demand-driven as consumers buy more goods during the pandemic. The current spike in interest rates is supply-driven.
Liners diverted near the Cape of Good Hope extended their sailing time and took up the supply of ships and container equipment. But as routes adjust to longer routes, rates should, in theory, stop rising, dampening higher demand.
Container shipping companies have taken in a record number of new ships this year, which should leave them with more vessel supplies to handle longer routes. In addition, the Chinese New Year holiday in early February should temporarily limit ship demand and ease supply constraints.
Lars Jensen, CEO of consulting firm Vespucci Maritime, wrote in an online post: "Once Chinese New Year passes, not only will demand drop, giving us some breathing space, but we will also start to see the flow of ships and equipment on the new route around Africa enter a predictable pattern."
S & P Platts Index
The impact on the contract market is reflected in the China Container Freight Index (CCFI), unlike SCFI, CCFI also includes contract rates. While the SCFI index retreated this week, the CCFI index rose 9%.
In terms of in stock exchange rates, S & P Global'sPlatts Energy Information(Platts) assessment shows that the in stock exchange rate has peaked.
The North Asia-Mediterranean spot price announced by Platts on Thursday was US $5,700 per 40 feet equivalent, down 19% from the high reached from January 9 to 15. The company's assessment for North Asia-Northern Europe is $4,800 per FEU, down 20 percent from its January 9-10 high.
In contrast, interest rates on U.S. imports remain at their highest levels, albeit at a slower pace.
Platts Energy Information on Thursday set the Southeast Asia-US East Coast freight rate at US $6,500 per FEU, up 195 percent from December 1. The North Asia-US East Coast rate was US $6300 per FEU, up 174 percent. The Southeast Asia-US West Coast rate was US $4500 per FEU, up 181 percent. The Southeast Asia-US East Coast price was US $4,300, up 173 percent.
"This still means that freight rates will be much higher than pre-crisis levels, because longer routes will consume a lot of capacity and bring additional costs, but I expect the in stock surge in freight rates to be abated." On the other hand, the contract rate may rise, because in the foreseeable future, it seems that we may enter a ring Africa (mode)."
(Chart: FreightWaves data based on Platts)
Druri WCI Index
Druri Worldcontainer index(WCI) shows that freight rates are still rising, although the European market is much slower.
For the week ending Thursday, the WCI Global Index was up 5% from the previous week. The index from Shanghai to Rotterdam in the Netherlands was $4,984/FEU, up only 1% on a weekly basis. The in stock exchange rate between Shanghai and Genoa, Italy, averaged $6,365 per FEU, also rising 1% on the week.
In contrast, the WCI Shanghai-Los Angeles index rose 13 percent to $4,344 per FEU, and the Shanghai-New York index rose 9 percent to $6,143 per FEU.
Baltic FBX Index
The Baltic Cargo Daily Index (FBX) global composite index was trading at 3,409 dollars per FEU on Thursday, unchanged since Monday.
The FBX China-Mediterranean freight rate was US $6,403 per FEU, 8% lower than the high reached on January 18. China-Nordic freight rate was $5366/FEU, down 7% from January 18.
FBX China-East Coast freight rates remain at their highest levels during the Red Sea crisis at $6,142 per FEU, flat since Monday but up 143 percent since December 1.
FBX China-West Coast freight rates are still rising, reaching their highest level of $4,198 per FEU on Thursday, up 169 percent since December 1 last year.
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