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Home » Global Trade News » Asia-Europe Container Shipping Under Pressure
Last updated on September 28, 2023 by Ben Thompson

Asia-Europe Container Shipping Under Pressure

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While the recent dip in trans-Pacific spot rates has garnered attention due to double-digital falls over the past month, Europe’s shipping industry is grappling with greater challenges. The Asia-Europe trade, vital to container shipping operators has come under significant strain.

Freightos recently highlighted a divergence in the shipping industry’s fortunes: while trans-Pacific spot rates still exceed 2019 levels, carriers struggle in the Asia-Europe lanes. The Freightos Baltic Daily Index revealed that China-North Europe spot rates have plunged below $1k USD per forty-foot equivalent unit (FEU) – the lowest since the commencement of FBX index reporting.

Exacerbating Europe’s challenges, the Ukraine-Russia war has affected container shipping. The conflict has stifled Europe’s domestic and external demand, intensified inflation, and doused consumer sentiment, as detailed by the Swiss National Bank. Europe’s economic dynamics in turn are affecting spot rates which, after a brief surge in August, have receded. The FBX China-North Europe assessment plummeted to $996 per FEU this month.

Furthermore, the Asia-Europe lane is wrestling with weak demand and unprecedented capacity growth. The rapid capacity growth in global container-ship capacity the fastest ever recorded, is predicted to persist for another two years. A surge in Megamax deliveries – vessels tailored for Asia-Europe with a capacity of 23,000-24,000 TEUs – is intensifying the situation. With most terminals unequipped to manage these behemoths outside of Asia-Europe routes, the shipping pressure in the region is mounting.

Asia-Europe rates are approaching their 2015-2016 lows, a period marked by a relentless price war amongst container lines. Such a dip had led to significant financial upheavals, including the bankruptcy of South Korea’s Hanjin.

Unlike the 2015-2016 crisis, ocean carriers are currently buoyed by substantial cash reserves, a legacy of their windfalls during the COVID-driven boom. This financial cushion might offer the resilience needed to navigate the tumultuous waters of Asia-Europe rates for the time being.

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