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The freight cost of the European line is inverted! The results of the negotiations between Russia and Ukraine are the key!
Feb 21,2025
Recently, freight prices on the European line have collapsed, and there has even been a "inverted" phenomenon of spot prices below contract prices. This was mainly due to a weak European economy coupled with a price gouging scheme by the new seaborne union, which caused freight prices to fall sharply.
This week's European line freight prices are about $2,500 per 40 cubic meters, while this year's European Line contracts are about $2500 to $3,200, depending on the shipment volume of the shipper. Due to the many market variables, the proportion of long contract prices signed on the European line is relatively low this year, and many shippers choose to sign quarterly or half-year contracts.
In response to the situation, the major shipping companies are planning to increase their freight rates in March, showing their determination to stabilize prices. Maersk March 3 shouted up to $4000, Mediterranean Shipping (MSC) in the first half of March shouted up to $4340, Ocean Network (ONE) in the first half of March shouted up to $4016, Hapag-lloyd throughout March shouted up to $4100. However, because this time the shouted price increase reached $1,500 or more, many shippers believe that it is very difficult to raise prices, and whether or not to raise the price will be achieved and how much the increase will be observed.
Industry insiders believe that if Russia and Ukraine can reach a ceasefire agreement, post-war reconstruction will increase freight demand, which is good news for freight rates on European and Mediterranean routes. But the later the Red Sea crisis is resolved, the better. In the long run, the end of the war would help to lower energy costs, slow inflation and improve the eurozone's economy and purchasing power, thereby increasing freight volumes.
It normally takes two to four weeks for China to resume work after the Chinese lunar calendar, and there appears to be no good expectations at this time. Full resumption of work may not be until the end of March, when the strength of shipment recovery will be key to influencing freight price trends. Freight forwarders said that shipping companies are nervous about the decline of freight rates on the European line this year. In addition to the weak economy, they are also worried about the lack of Chinese electric vehicles in order to avoid the EU customs duties last year. Chinese electric vehicle manufacturers have purchased pure car carriers one after another.
Xie Zhijian, former chairman of Yangming Shipping, and other industry figures said that because of the Red Sea crisis and tariff issues in the past year, a lot of goods were imported early on the European line, which caused a relative reduction in shipments this year. If Russia and Ukraine end the war and start reconstruction and increase cargo volume, it will be good for the European and Mediterranean lines. In the longer term, the end of the war will help to drive down energy costs, reduce inflation, improve the eurozone economy and purchasing power, and increase the volume of goods.
In addition, it is reported that the United States and Russia have agreed to each form a negotiating team to find a lasting and mutually acceptable way to end the war between Russia and Ukraine as soon as possible. In response, several shipping companies and cargo carriers believe that the United States is eager to acquire 50% of Ukraine's rare earth minerals and will do its best to facilitate a ceasefire agreement between Russia and Ukraine.
However, another variable on the European line is the crisis in the Red Sea. Israel and Kazakhstan will launch the second phase of Gaza ceasefire negotiations this week. If the Red Sea can be resumed in the second or third quarter of this year, releasing more than 10% of the excess capacity, it will affect shipping prices and the shipping industry will be nervous.
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