China containerized futures markets are pricing in increases until end 2024: International freight insights APAC 2024 week 45

Access ZG’s indicators from Asia freight forwarders are that spot ocean freight rates offered by some carriers increased 5-10% from the previous fortnight.

China containerized futures markets are pricing in increases in global ocean rates between now and end of December 2024, and then gradual declines throughout first half 2025.

The China Containerized Freight Index (which is the best index for spot ocean freight between Asia and Australia) showed spot ocean freight rates China to Australia increased 1% over the past week (rates are up 38% over a 3-month period). Rates for China to all global routes were flat over the past week. Here’s a year-to-date chart comparing ex China to Australia & New Zealand ocean rates, with ex China to South East Asia and all global rates ex China.

The index lags the information Access ZG sees in both other metrics and on the ground with Asia freight forwarder and shipping line quoted rates. The recorded index rate to Australia may see ocean freight increases in coming weeks. Sustained large rate falls may come closer to year end/ early in the new year. The Shanghai Containerized Freight Index shot up 5% over the week indicating that global ocean rates ex Asia will be on the rise in coming weeks.

Air freight rates (full-market mix of spot rates and contract rates) within Asia Pacific increased 1%, while overall worldwide rates also were up 3% over a two-week comparative period. Air freight faces a capacity challenge especially for the peak season. There is a risk of air freight rate increases in the coming weeks.

Overseas and international freight may be the most vulnerable, least controlled part of your company’s international supply chain. Access ZG provides Australia & Asia on-the-ground specialist staff, expertise & resources for international supply chain management and brokerage & negotiating with shipping lines and forwarders. Reply to arrange a no obligation discussion via your choice of phone call, Zoom online or face to face (for those based in Sydney).  

Carriers face battle to raise spot rates

Per Container News, carriers are desperate to keep the spot market elevated. It is clear there is still volatility in ocean supply chains and carriers will point to the ongoing impact of conflict in the Red Sea, but the fundamental direction of the market is downward and the November rate increase is unlikely to stick for too long. It is still expected that volatility will remain in the market making this year’s contract negotiations particularly complicated for the shipping lines, shippers and freight forwarders. It is crunch time for shippers and carriers because neither side wants to be exposed to ongoing market volatility in 2025 by locking into long term rates that are either too high or too low. That is why the market is turning more towards index-linked agreements which work in the interests of both parties in the event of significant market movements.

Capacity imbalance sees Container shipping tilt to buyers’ market

Container News cautions that supply side statistics compared to expected demand, point to a significant decrease in rates, unless an unexpected event similar to the Red Sea diversions disrupts the market again. Despite new vessels being delivered at an unprecedented rate in 2023 and into 2024, what still remains on the orderbook is of such a magnitude that capacity can do nothing else than expand. 470 ships, totalling about 3.2 million TEUs, will be delivered by the end of this year, with more capacity arriving during 2025. It’s expected that the global container shipping fleet will grow to more than 31.4 million TEUs, an annual increase of 10%. A collapse in demand was expected this year, but the Middle East conflict and the Red Sea attacks meant that excess tonnage was absorbed by diversions around the Cape of Good Hope.

Shipping lines, however, are optimistic that the current market ‘has legs’, with some of the carriers now revising their 2024 income projections upwards. While shippers will clearly enjoy lower rates, should there be no further disruptions to supply chains, but severe overcapacity will lead carriers to limit capacity. That will mean cutting back on fleets and will include operational measures such as skipping sailings, sliding schedule weeks – which are both utilised in an overheating market – or cancelling services altogether. The upshot, is that service levels will suffer. With poor service levels already a common complaint of shippers, the question is whether they and perhaps regulators or politicians will stand for it, especially after an extended period of bumper carrier profits.

Asia Pacific airfreight market on the up

The Loadstar explains that air freight out of Asia is going strong, according to forwarder Dimerco “The traditional peak season began in mid-October, immediately following China’s Golden Week holiday. Alongside ecommerce growth, the launch of new electronic goods and products has driven prices upward. Capacity within intra-Asia routes is currently extremely limited, as airlines allocate a greater portion of first-leg allotments to long-haul shipments, due to higher revenue potential. November is anticipated to be the peak month of 2024.” From south China, the volume of ecommerce has increased “in anticipation of holidays sales like 11/11, Black Friday and Christmas, resulting in higher rates and limited space”. Flights out of Hong Kong to Singapore and Taipei are particularly busy with ecommerce, it added.

Could this five-in-one collapsible container finally be the game-changer?

Per the Loadstar, Compact Container Systems (CCS) has released its SeaFold HC 40ft, a folding container that can collapse to make a stack of five the same size as a single feu, and allow easy repositioning of empties. “The opportunity to place five of our folded containers in the same slot as one 40ft HC standard container is a game-changer in managing box movements, maximising storage capacity and greatly reducing carbon emissions,” claimed CCS CEO Charlie Santos-Buch. Shipping has long been enamoured with the promise of a container that can fold down and stack. But despite decades of attempts at creating foldable boxes, none has yet reached the threshold of wide-scale adoption. The most immediately obvious concern is their strength and worries about stack collapse – in most cases this is the first thing to be addressed in new designs. CCS says the container can be collapsed in seven minutes. It remains to be seen if this new iteration of the folded container is the one that will, finally, take off.

Access ZG (access-zg.com) provides services to international logistics & trade participants, specialising in connecting with Asian markets.  

Thanks for taking the time to read and hope you gained some valuable insights,

Jeffrey Levy CA 

Founder

ACCESS ZG 

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