By ashley Kao.    photo: @wayhomestudio

Almost every shipping lines post profits in excess of USD 150 billion dollars in profits this year. However, the spot rates recently experienced the biggest drop in more than a year. Many people asked when will the container ship market crisis end?

Drewry’s: The world Container Index fell 4.9% this week to USD 9,195.41 per 40ft container, which is the biggest drop in more than a year. However, the index remains 252% higher than a year ago. According to the data from WCI, the rate from SHA – LA dropped 10% this week to USD 9,857 per 40ft, which was the first time since July this year the rate less than USD 10,000. From SHA to NY, there’s similar trend that the rate dropped 7% to USD 12,667 per 40ft, the first time since July the rate less than USD 13,000. 

Lars Jensen, the CEO of container advisory Vespucci Maritime commented, spot rates have dropped compared to the extreme peak in mid-September, but they are still at levels that are extreme high in history. For example, from SHA – LA, the rate is down USD 2,500 since the peak. However, there are still up by USD 8,400 compared to in November of the year 2019. One of the reasons that the spot rate decline is because shipping lines focus more on securing clients on long-term contracts. Maersk revealed that 64% of its liner clients are in fixed long-term contracts, up from 50% at the start of the pandemic.

Despite the rates dropped, the real market situation the freight rate has not fallen too much. Due to the policy of China’s electricity limitation which caused the reduction in market volume, the rates have begun fall slightly this week. However, the key problem remains on the US ports congestion. The latest data shows that 70 container ships are waiting outside at the ports of LA/LB, and there’s also large number of lineups in other northern areas.

After the container ships arrived at LA/LB ports, they still need to wait about a month for anchor or drifting off the ports, and other cases such as delays in pickup or short of manpower for truck. Many shipping lines skipped to stop at Northwestern US ports, the rate basically didn’t drop with the limited space. There’re also tight space issues in USEC and IPI route. The entire transition time from China to USWC is about 3 months. Some customers even changed their strategy on ocean shipping. Urgent orders can only change to air shipping.

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