Shanghai Containerized Freight Index Plunges to New Low
One of the indicators that show that things are not all that rosy in China, or in the global economy, is the price carriers charge to ship containers from China to its big trading partners around the globe. Those prices have totally collapsed.
Two factors are at work: Languishing demand for Chinese manufactured goods around the world; and a growing oversupply of ships to transport these containers (given the languishing demand), which has turned into a price war, with the largest carriers hoping to push the smaller ones out of business [Top Carriers Wage Price War to Form Global Shipping Oligopoly].
The rates for shipping containers from China to the rest of the world have been in trouble since February. “Trouble” is a euphemism. They have relentlessly plunged on a weekly basis with only some upticks in between.
The Shanghai Containerized Freight Index (SCFI), a measure that tracks spot rates (not contractual rates) of shipping containers from Shanghai to 15 major destinations around the world, is volatile. But the trend since February has been a pure rout. And for last week, the SCFI plunged 7.4% to a new record low.
The 44-point drop brought the index to 548.77, down 45% from where it had been during the Financial Crisis: it was set at 1,000 on October 16, 2009. And it’s down 51% from February this year. This is what the terrible plunge looks like:
Rates tracked by the SCFI dropped on 9 of its 15 routes.
Spot rates for shipping containers from Shanghai to Northern European ports plunged 22.7% to $400 per TEU (Twenty-Foot Equivalent Unit), or about half the break-even rate for these routes, estimated at around $800 per TEU. But it’s still up from the $200-per-TEU range in late June, a previously unimaginable low.
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