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Container shipping rates on the Europe route have dropped to $750-850 per FEU!

Despite the traditional peak season in the container shipping market not yet being over, freight rates have been declining for three consecutive weeks. According to reports, the average China-to-Europe rates have fallen from $900 to $750-850 per FEU, which is $150-250 below the cost price. Return freight is even more pessimistic, dropping from $400-450 per FEU to $20-100. Meanwhile, bunker fuel prices for ships have increased by 21% in the third quarter, and international oil prices are expected to continue rising in the fourth quarter, painting a rather grim outlook.

Industry insiders point out that global ultra-large container vessels primarily operate on the Europe route. These vessels are relatively new, with higher construction costs, and face significant fixed costs while being idle. Compared to the US route, the Europe route has a lower idle vessel ratio and greater rate stability.

Currently, the Europe route relies on charging container terminal handling fees to offset the losses from low freight rates. In European ports, the fees amount to approximately €150-200 per container, while in Taiwan, it is around 8,000 New Taiwan Dollars. The charges may vary slightly among companies due to anti-monopoly measures, but the difference is not significant. However, it is confirmed that the Europe route is currently operating at a loss, while the freight rates on the US route are still above the breakeven level.

According to assessments by major container carriers, the fourth-quarter rates on the US West Coast may fall below $1,200 per FEU, and at the current cost level of $1,300-1,500, any shipping company would face losses. The current rate is approximately $1,700 per FEU.

An individual who has been tracking the container shipping stock market for a long time states that carriers’ performance during the third quarter peak season (ending on September 22) has been somewhat affected by significant capacity control by shipping companies and reduced weight due to the Panama Canal drought. The Shanghai Containerized Freight Index (SCFI) has grown by 1.6% this quarter, while Singapore bunker fuel prices have averaged a 21.3% increase in the third quarter. Therefore, it can be reasonably inferred that container shipping companies’ profits during the third quarter peak season will be significantly lower than those during the second quarter lull.

The individual points out that, according to seasonal conventions, the peak season for container shipping typically occurs from July to October, with July and August being the busiest periods. Currently, September is still within the peak season; however, the latest SCFI index shows a decline as of September 22. This decline in freight rates will exert greater pressure on shipping companies, given the high costs of idle vessels, relatively new vessels with higher construction costs, and other factors that make it more challenging for shipping companies during rate declines.

Currently, shipping companies primarily rely on charging container terminal handling fees to compensate for the losses from low freight rates. However, even with these fees, shipping companies are still unable to achieve profitability at the current rate levels. According to industry experts’ assessments, if freight rates continue to decline, shipping companies may face even more severe losses.

It is worth noting that the peak season for container shipping typically occurs from July to October, especially with July and August being the busiest periods. However, the latest index indicates that freight rates have already dropped, which may mean that shipping companies’ profits during this quarter’s peak season will be significantly lower than those during the second-quarter lull.

Overall, the container shipping industry is facing severe challenges, with shipping companies dealing with declining freight rates and high cost pressures. This will require shipping companies to take appropriate measures to cope with this challenging market environment.

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