Asia–Europe Ocean Freight: Newton in Reverse

In recent weeks, ocean freight rates from Asia to Europe having been dropping at a rapid pace. But before shippers get too comfortable, the carriers are sharpening their pencils and talking about “market corrections.” Translation: higher rates are coming whether demand likes it or not.

Where We're At

Spot rates have been drifting around USD 1,300–1,400 per FEU and at that level, it’s borderline loss-making territory. No one wants to keep moving steel boxes across oceans just for the practise.

So, what do carriers do when the market turns against them? You guessed it, cue the blank sailings. Cancel a few services here, squeeze some capacity there, and before long you’ve got just enough scarcity to talk the market back up again.

The November Target

The rumour mill is buzzing again, and some carriers want to see rates pushed north of USD 2,500 per FEU by 1st November and have signalled their intent to clients. Whether that’s achievable or just wishful thinking depends on how disciplined they are with capacity.

It’s a bit like herding cats but these cats own the ships. If they cut enough sailings, they’ll tighten supply and push rates back into what they like to call “sustainable” territory (read: profitable).

Newton’s Law… in Reverse

Sir Isaac famously said, “What goes up, must come down.” In my view, in container shipping, the law also works in reverse: “What goes down, must go up!!!”

Rates can only tumble for so long before carriers get scared and take action. And right now, they’re scared.

Shippers: What To Do

• Don’t get lulled into false security. Rates at today’s levels won’t stick, the carriers won’t allow it.
  
  
• Expect more blank sailings. Reliability may take another hit as lines try to claw rates upward.
  
  
• Plan ahead for November. If you’re budgeting, don’t anchor yourself to today’s numbers. Expect a bump, and then some.
  
  
• Watch the SCFI. If it doesn’t creep back up, the pressure for further cuts to capacity will only intensify.
  
  
  

Bottom Line

Asia–Europe rates are in that awkward place: too low for the carriers, comfortable for shippers and unsustainable for anyone hoping to make money. Which means the only way is up.

The next few weeks will be a tug-of-war between soft demand and carrier discipline. One thing’s for sure - they won’t let USD 1,e00–1,400 linger for long. With blank sailings, tightened capacity and a fair bit of spin, expect the push toward that magical USD 2,200+ mark as we head into November.

So buckle up, the rate rollercoaster is on its next climb.