Ocean freight rates expected to fall as Middle East ceasefire takes effect

Container shipping rates are expected to continue to fall in February, impacted by the Middle East ceasefire and the drop in demand due to the Lunar New Year, despite shipping lines’ efforts to control capacity.

According to data from Xeneta, spot rates from the Far East to Northern Europe are currently at $3,795 per FEU, while the Mediterranean is at $5,085 per FEU, down 22% and 13% respectively from January 1. The freight market analysis firm also said that early indications are that spot rates on both routes could fall another 5-10% in early February.

Routes to the US also saw significant declines. Rates to the US East Coast fell 7% to $6,417 per FEU, while those to the US West Coast fell a sharp 14% to $5,021 per FEU in January. Data from Xeneta suggests that rates on the US West Coast may continue to fall, while rates on the US East Coast are trending more stable.

“Ceasefire in the Middle East does not suddenly mean there is now safe passage through the Red Sea for all container ships – but it is enough to cause a change in market sentiment and this has a real impact on freight rates,” said Peter Sand, Xeneta’s chief analyst.

In the face of falling rates, carriers are adopting a strategy of aggressive capacity management. Blanked sailings from the Far East to the Mediterranean are expected to rise to 38,900 TEU by the end of February, up 318% from current levels. Similarly, the Far East-North Europe trade will see 75,700 TEU of cancellations, up 449%.

The current ceasefire, which came into effect on 19 January, is expected to last 42 days before moving into Phase 2, potentially leading to a long-term deal. However, Sand said February will be crucial in determining the direction of freight rates in 2025.

Although rates have eased, they are still significantly higher than they were before the Red Sea crisis. The market is also under pressure from a record number of new vessels coming online. If the Red Sea trade routes are fully restored, the market could face the risk of a collapse due to overcapacity.

The situation remains fluid, with geopolitical factors influencing the market, including former President Donald Trump’s proposed import tariff hikes, which could push freight rates back up.
 

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Source: Phaata.com (via gCaptain)

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