BAROMETER. Peaks appear to have been reached in spot freight rates on the Asia-Europe route, despite continuing tension in the Red Sea. This supports the idea of structurally weak demand.
The post-lockdown scenario of spring 2020, with 5-digit FAK freight rates on Asia-Europe, will finally not be repeated during this summer 2024, contrary to what some market players predicted. A plateau has been reached on the Asia-Europe route , in a market that has now become accustomed to the Cape of Good Hope route. On the transatlantic route, the market continues to erode slowly, due to excess capacity.
Shipping companies are sending a signal of moderation to the market via the publication of new stabilised or downward monthly FAK conditions. There are two reasons for this strategy. First of all, airlines have an interest in capturing more bookings via their own digital tools. Secondly, they are rather reluctant to see that their freight forwarding customers proportionally generate much higher margins than they do, while they take all the operational and capital risks.
- A weak demand
In a way, the demand could be described as “sulking”. For shippers, the Cape Town route is too long, and freight rates are too high. In addition, they lack visibility on sales forecasts, even though inventories remain at a reasonable level. Shippers can therefore afford to wait, even if it means finding suppliers closer to the places of consumption if necessary. In this context, there has been no massive movement towards stock replenishment. On the other hand, there was an anticipation on the Christmas supply campaigns. The shippers have taken into account the risks of longer delays, but also, to a lesser extent, the threats of increasing customs duties on entry into the European Union for certain products.
- Continuing tensions in the Middle East
The extreme tension is not abating in the Red Sea. Since the start of the conflict, the Houthis have carried out some 200 attacks. Two ships have been sunk and 4 sailors killed, including 2 Filipinos. More and more voices are being raised in the wider international community around a need for normalisation of maritime security in the area, starting with Israel, which is seriously beginning to suffer from geographical isolation over time. On July 20, Israeli planes launched raids against the Yemeni port of Hodeida, in response to a drone attack that killed one person in Tel Aviv. In early July, the Philippine Maritime Industry Authority (MARINA) called on shipping companies to avoid the Red Sea, but also the Gulf of Aden. Indeed, the conflict is starting to widen geographically (...)
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