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Rising Freight Rates on Transatlantic Routes?

Recently, the shipping market has once again become a focal point of industry attention, particularly regarding the trend in Mediterranean route freight rates. According to reports, the Mediterranean Shipping Company (MSC) raised rates by an additional $2,000 on the US East Coast route on July 1, bringing the rates close to the $10,000 mark. This trend has sparked widespread discussions within the industry, including predictions and concerns about future rate trends.

Originally, the Mediterranean route’s rates were planned to reach $7,400 per TEU (twenty-foot equivalent unit) by mid-July. However, the actual situation indicates that rates have only risen to around $7,000. This change suggests that while rates are still increasing, the pace has slowed down, possibly indicating that the route’s rates are nearing their peak. Meanwhile, transatlantic route rates also approached their expected highs after adjustments on July 1.

However, market trends are not entirely clear-cut. On one hand, major freight forwarders have noted a significant increase in the number of ships returning to Asia, leading to increased capacity supply. Additionally, the early start of peak season may also bring the possibility of an early end. Nevertheless, shipping companies have stabilized rates through capacity control, and port congestion and container shortages persist, keeping rates at elevated levels.

On the other hand, geopolitical factors significantly impact the shipping market. Ongoing tensions in the Middle East and exacerbated port congestion pose challenges to the shipping supply chain. Notably, the continued conflict between Israel and Palestine has disrupted the Red Sea route, resulting in a major reversal in global container vessel supply and demand. Simultaneously, prolonged labor negotiations at US East Coast terminals have increased the pressure for work stoppages, further adding to market uncertainty.

Given this backdrop, shipping industry experts and insiders hold differing views on rate trends. Some believe that as long as the Red Sea crisis persists, rate corrections may occur, but significant declines are relatively limited. However, others argue that there is a possibility of future rate decreases. This depends on several key factors, including whether the EU immediately announces tariffs on Chinese electric vehicles, consumer purchasing power, and whether shipping companies significantly increase capacity supply.

It’s worth noting that the SCFI (Shanghai Containerized Freight Index) has risen for 11 consecutive weeks, with rates on the four major routes and Southeast Asia routes showing an upward trend. While this reflects overall prosperity in the shipping market, it also exposes potential risks. Shipping industry experts generally agree that future rate trends will be influenced by various factors, including geopolitics, economic conditions, and market supply and demand. Therefore, shipping companies and freight forwarders need to closely monitor market dynamics and adjust strategies flexibly to address potential risks and challenges.

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