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Drewry’s World Composite Index retreats 1% this week, but still 8% up year on year
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The WCI’s average composite index rate year-to-date is US$8,524 per 40ft container, US$5,078 higher than the five-year average of US$3,446
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The container market watcher expects the index to decrease slowly in the next few weeks
Drewry’s World Container Index composite index eased 1% to US$7,502.43 per 40-ft container as of Thursday, June 16, but was 8% higher than in the same week in 2021, the London-based supply chain advisors said.
The latest reading on Drewry’s index follows other market observers’ forecasts of a deep decline of as much as 30% in container rates in the second half of 2022 due to high inflation and supply-side pressure from newbuildings.
On the busiest transpacific route, freight rates on the Shanghai – Los Angeles route dropped 3%, or US$235, to US$8,378 per forty-foot equivalent units (FEU), Drewry said.
Spot rates on the transatlantic Rotterdam – New York route fell 2%, or US$162, to US$6,938 per FEU, the WCI creator reported. However, rates on the New York – Rotterdam route gained 2% to US$1,204 per FEU, Drewry said.
Rates on the Rotterdam – Shanghai and Los Angeles – Shanghai routes fell 1% each to US$1,414 and US$1,235 per FEU, respectively, Drewry said.
Drewry said rates on the Shanghai – Rotterdam, Shanghai – New York and Shanghai – Genoa routes hovered around the previous week’s level.
The container market watcher expects the index to decrease slowly in the next few weeks. The decline was preceded by falling head-haul and regional volumes in the first quarter of 2022, albeit remaining above Q1 2019 levels.
Bimco chief shipping analyst Niels Rasmussen said more than a week ago that early signs of weakness were apparent in container volumes, with backhaul volumes having fallen below Q1 2019 levels, according to the CTS index he quoted.
Rasmussen listed further negative signs, including a 12.6% drop in the China Containerized Freight Index (CCFI) since early November 2021, slowing rates on the time charter market, slackening second-hand sales and purchase activity, and slowing newbuilding contracting.
On the demand side, Rasmussen noted a fall in the International Monetary Fund global GDP growth forecast to 3.6% for 2022 and 3.6% for 2023, with an even lower outlook for the Euro-Mediterranean region of 1.8% and 2.1% for 2022 and 2023, respectively.
The forecast is the result of compounding downside risks including supply chain disruptions, inflation, and potential impacts on commodity prices.
On June 9, S&P Global Market Intelligence issued a report forecasting a 20-30% drop in container freight rates that will coincide with a similar drop in dry bulk rates as trade growth eases due to high inflation, endemic consumer pattern, and newbuildings coming onto the market.
S&P Global analysts said world container rates could fall to an average of US$6,000-7,000 per FEU from US$9,000-10,000 currently. Such a correction would bring relief to traders and consumers reeling from high prices blamed on excessive freight and fuel costs.
The analysts said they expect the world container rates retreat to come from reduced congestion in Chinese ports with the easing of COVID-19 restrictions in Shanghai, China’s commercial hub, adding that it will be a major downside risk in the second half, specifically after the third-quarter peak season.
