Xeneta: Container Freight Rates Continue to Fall in February

Container freight rates are expected to continue to fall in February due to the impact of the ceasefire in the Middle East and the Lunar New Year holiday, forcing shipping lines to control capacity to limit the decline.

Container Freight Rates Continue to Fall in February

(Source: Sputniknews)

The Middle East ceasefire and the Lunar New Year holiday will cause container freight rates to continue to fall in February - forcing shipping lines to take measures to limit the market decline.

According to the latest data from Xeneta, an ocean and air freight rate analytics platform, the average short-term contract rate from the Far East to Northern Europe is now at $3,795 per 40-foot container (FEU) and $5,085 per FEU to the Mediterranean, down 22% and 13% respectively since January 1.

Initial data suggests that rates will continue to fall from February 1, with further declines of 5-10% expected on both trades.

From the Far East to the US East Coast, the average short-term contract rate fell 7% in January, now at $6,417 per FEU. Meanwhile, the Far East-US West Coast trade is at $5,021 per FEU, down 14% from the start of the month.

On both US trade lanes, rates have been trending lower in the second half of January after falling sharply at the start of the month.

Moving into February, rates could continue to fall, particularly on the US West Coast, while the East Coast could remain more stable.

Peter Sand, Chief Analyst at Xeneta, said: "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.

We must factor Lunar New Year celebrations in the Far East, which traditionally sees a slowdown in containerized exports at this time of year, but there is little doubt the evolving situation in the Red Sea is contributing to falling freight rates.”

Carriers adjust capacity to control rates

Container lines are currently implementing capacity control measures to slow the market decline.

For the Far East-Mediterranean trade, blank sailings are set to increase steadily, reaching 38,900 TEU (20-foot container units) in the week commencing 24 February, up 318% on the current level.

The Far East-North Europe trade also saw significant capacity cuts, with blank sailings reaching 75,700 TEU on 24 February, up 449% on the current level.

Sand said. “Carriers will not sit on their hands while freight rates collapse. They will do everything they can to keep rates elevated and have got much smarter at capacity management in recent years.”

Geopolitics weigh on the outlook

Phase 1 of the ceasefire between Israel and Hamas began on 19 January and is expected to last 42 days before entering Phase 2, which could lead to a permanent truce.

Sand said: "February may be crucial in understanding how ocean container freight rates will develop in 2025. The ceasefire in Middle East is set to enter Phase 2 and we will see exports increase from the Far East in the first half of the month following Lunar New Year.

Despite the decline in January, we must remember that average spot rates are still massively elevated on the Far East fronthauls to Europe and US compared to pre-Red Sea crisis, so they potentially have a long way to fall.

Carriers are going to find it extremely difficult to keep rates elevated, especially given the record number of ships entering service, so we could see markets collapse if there is a large scale return to the Red Sea.

The situation is far from certain and we know how suddenly and dramatically the outlook can change in ocean container shipping. There is a still a long way to go before a lasting peace deal is agreed in the Middle East and other geo-political factors, such as Trump’s tariff proposals, could come into play and put upward pressure on freight rates."

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