Global shipping rates have shown their steepest decline in a decade, deepening concerns within the domestic shipping industry.
According to statistics from the National Logistics Information Center on Sept. 24, the Shanghai Containerized Freight Index (SCFI), which aggregates freight rates for 15 container shipping routes, plummeted to 1,198.21 as of Sept. 19, a 14.3% drop from the previous week. This marks the largest decline since Nov. 12, 2015 (-15.1%), approximately 9 years and 10 months ago. It is also the first time the SCFI has fallen below 1,200 since December 2023, about 1 year and 9 months ago. The China Containerized Freight Index (CCFI), another indicator reflecting global market conditions alongside the SCFI, also recorded a decline of 5.07 points from the previous week to 1,120.23.
Container shipping rates have been on a continuous downward trend since the beginning of this year. The average SCFI for the second quarter of this year recorded 1,645.4, a 37.4% decrease compared to the same period last year. It also shows a 6.6% decline compared to the previous quarter. Similarly, the CCFI also fell to 1,162.4 in the second quarter, marking decreases of 19.2% and 13.9% respectively for the same periods.
NH Investment & Securities explained, “The SCFI index recorded its largest weekly decline since 2016,” adding, “Freight rates for U.S. routes plummeted, with the West Coast dropping 31% and the East Coast 23%.” While still higher than two years ago when the shipping industry faced a recession, the continuous trend and its pace are far from reassuring.
Industry experts suggest that while geopolitical risks such as the Red Sea crisis and increased trade volume between the U.S. and China drove shipping rates to soar until last year, this year has seen intensified pressure on rates due to decreased trade volume from the U.S.-initiated trade war and an oversupply of container ships. Additionally, the port entry fees that the United States will impose on Chinese ships from the middle of next month are expected to act as an additional negative factor, reducing global trade volume and pulling down freight rates.
Dark clouds are gathering over the performance of the domestic shipping industry, especially HMM, Korea’s largest container carrier. According to the securities industry, HMM’s operating profit (consolidated basis) for the third quarter is estimated to plummet by 81.8% year-on-year to 265.8 billion won. Furthermore, sales are projected to decrease by 26.5% to 2.6119 trillion won, and net profit is expected to shrink by 74.9% to 436.1 billion won.
The Korea Eximbank Overseas Economic Research Institute recently stated in its second-half outlook report, “Container volume is significantly slowing down due to the global economic slowdown and inflation caused by U.S. tariffs,” and analyzed, “With new ship deliveries exceeding 6% of the fleet capacity at the beginning of the year expected by the end of this year, a deterioration in market conditions is inevitable.”
Source: Business Korea
