Container freight and charter rates continue to cool due to a drop in demand caused by the ongoing impact of lockdowns in China.

Manufacturing shutdowns, the closure of warehouses and trucking disruptions have led to a steep decrease in export volumes from Shanghai, resulting in falling freight rates.

Several liner operators are seeking to divert vessels away from the port due to congestion and other problems caused by the lockdown.

Danish liner giant Maersk and Japan’s Ocean Network Express (ONE) said they have stopped shipping refrigerated goods or dangerous cargoes to Shanghai.

Maersk said that several of its vessels will be omitting the port due to congestion.

ONE added that limited trucking facilities and reefer plug shortages has meant the situation is “highly stressed”.

The Japanese carrier added that cargoes would be diverted to other transshipment ports until the situation improved.

Rates hit low

Reduced exports resulting from ongoing Covid-19 lockdowns imposed in Shanghai at the end of March are impacting headhaul freight rates from Asia to the US and Europe.

Spot rates monitored by the Freightos Baltic Index dropped to $9,232 per 40-foot equivalent unit (feu) — its lowest level since the start of the year.

The fall could be partly attributed to seasonal factors ahead of a peak season later in the year, as well as more volumes being locked into long-term contracts, said analysts.

The largest impact has been on the trade from Asia to North Europe, where spot rates fell to $11,903 per feu, their lowest level since July 2021.

Wan Hai Lines, which operates the 1,728-teu Wan Hai 262 (built 2001) in its intra-Asian services, was one of the few charterers of sub-panamax vessels in the run up to Easter. Photo: Ezek/Creative Commons

Spot freight rates on the Asia to north Europe trade are about 20% down since the start of the year, reflecting the impact of the war in Ukraine.

Asia to US rates have also declined by around 20% since their peak. Rates from China to the US west coast were down to $15,817 per feu on 14 April and those from China to the US east coast down to $17,148 per feu.

Some of the biggest falls have been from Asia to the South America East Coast (SAEC) trade.

Spot rates on the trade were down 35% from January through to 1 April, having fallen from $4,440 per feu to $8,200, according to the Xeneta freight benchmarking portal.

Rates from Asia to SAEC have not been below that level since May 2021, it said.

Not over yet

The dip in rates is partly explained by some vessels skipping ports or departing less full from Shanghai and, thereby, having more capacity free for other stops on their loops, said analyst Judah Levine of freight portal Freightos.

Further falls in freight rates may lead carriers to cancel additional sailings out of Asia to decrease capacity and keep rates from plummeting, he added.

While the downside risks are mounting, the high-level freight rate environment has not played out fully, according to Fearnley Securities.

Congestion is building and unlikely to ease before the start of the peak season, which is expected to begin as early as June, the investment bank argued.

That could increase pent-up demand and lead to a fresh surge in vessels arriving at ports once Covid restrictions in China are loosened.

Charter ‘uncertainty’

The container charter market has also continued its gentle decline.

The New ConTex, which reflects six to 12-month charters for vessels of 1,100 teu through to 6,500 teu, slipped down by 2.6% by 14 April. The index registered its first decrease in 18 weeks for the week ending 31 March.

Shipowners and charterers are said to be seeking more clarity over the direction of freight rates, bunker prices, as well as the impact of lockdowns in China and the war in Ukraine.

The falls have meant that the six-digit rates paid to take sub-panamax boxships for short periods are no longer attainable, brokers said.

But there remains an appetite among operators to take some smaller vessels for longer periods as reflected by the charter of the V.Ships (Hamburg)-controlled, 2,546-teu Independent Spirit (built 2007).

The vessel is reported to have been taken on an extension by Taiwanese carrier Wan Hai Lines for 36 months at $47,500 per day, said brokers.

Separately, the 1,581-teu Hong Prosperity (built 2003) was fixed for up to two months trading with Chinese operator BAL Shipping Lines at $42,000 per day.