Freight rates rise after prolonged slump; is this rebound here to say or just a dead cat bounce?

Proving speculations right about higher freight rates out of Asia that first kicked off early last week, global benchmarks have risen this week following continuous decreases since mid-July. Currently, the question is whether this increase will be sustained. Although some anticipate ex-China rates will climb higher due to increased buying activity around the year-end, higher blank sailings and November 1 rate hikes from shipping firms, others believe that the downward trend will persist.

Freight rates increase for the first time since mid-July

According to Drewry , the world container index increased by 4% to $3,213 per 40ft container this past week. Since their July 25 peak, rates have dropped by a cumulative 63%.

After a decline since August, spot rates ex-China increased this week, and we expect this trend to continue as the Christmas rush intensifies, Drewry said.

Ex-China routes lead the rally

Drewry’s China to Northwest Europe route increased by 7% this week to $3,396 per 40 ft container after falling by a steep 91% since July 25. Meanwhile, rates to Southern Europe gained 11% this week, bringing the rate to $3,648 per 40 ft container. Rates saw a drastic 82% decline since mid-July for the route.

Drewry’s China to US West Coast rates inched up by 1% this week to $4,839 per 40 ft container, though they have declined by a cumulative 47% decline since July 25. Meanwhile, China to US East Coast rates remained stable this week at $5,241 per 40 ft container, while they were down by a total of 58% since mid-July.

Freightos China-US West Coast rates rise

According to Freightos , the global container freight index declined by 2% this past week to $3,300 per 40 ft container, although this week’s data will be updated today on Nov 1, Friday.

Rates from China to the US West Coast increased by 5% to $5,540 per 40-ft container last week. Meanwhile, rates to the US East Coast were down by 13% to $5,165.

Before speculations about higher freight rates widely proved right this week, rates from China to North Europe inched down by 1% past week to $3,489 and by 11% for Mediterranean to $3,451 per 40 ft container.

What lies ahead?

Is there a rebound in sight?

Freight rates have experienced a consistent downturn since peaking on July 25; however, they edged up this past week. This can be attributed to the increased year-end demand, particularly from China, a rise in blank sailings, and November 1 rate hikes from shipping firms.

According to Judah Levine, Head of Research at Freightos, there is anticipation that the pre-Lunar New Year demand increase could have an early start in November as European shippers still have to factor in longer transit times around the Cape of Good Hope. Additionally, with rates sliding on lower demand carriers have started to increase the number of blanked sailings on Asia – Europe lanes. 

Furthermore, reports that several shipping lines—including CMA CGM, Hapag-Lloyd, and ONE—plan to raise rates from November 1 have sparked speculation about a potential price rebound. These factors may sustain the recent increase for a longer time.

Temporary gains or sustainable upturn?

Although rates have risen, it is uncertain whether the upturn will be sustained.

Although freight rates are expected to reverse their declines in November as carriers implement a new series of rate hikes, the sustainability of the higher rates remains in question with carriers showing no efforts to cut capacity to match slack season demand. The next 4 weeks will provide clearer indications if the carriers’ bullishness is justified as the market heads into the critical 2025 contract negotiation season, said Linerlytica.

Some anticipate that freight rates will remain high in 2025, while others predict that the decline will persist. According to Loadstar, Drewry created scenarios with and without a potential strike on the US East Coast in January. Their analysis revealed that freight rates would rise in both cases. “If there is no port strike, some spot rates will decline, but overall, we believe there will be sufficient other factors, such as the increased emission trading system carbon taxes, which will increase by 75% from January,” said Drewry’s Philip Damas. He added that even if the Suez Canal reopens, Drewry does not expect container freight rates will go back to pre-pandemic levels.

Will rates continue to decline?

Meanwhile, according to Xeneta, “Unless carriers act more decisively to match offered container shipping capacity to demand through more blank sailings or outright cancelling of peak season services, then short term market rates are likely to erode at an even faster pace than seen in October.”

Though carriers attempt to counter the downward trend with rate hikes—such as the November 1 increase in the Far East to North Europe and the Mediterranean lines—Xeneta anticipates that declines will continue.

“European shippers could be spooked by the spot rate hike in early November, but they should not be. Carriers are desperate to keep the spot market elevated and halt the recent heavy declines. It is clear there is still volatility in ocean supply chains and carriers will point to the ongoing impact of conflict in the Red Sea, but the fundamental direction of the market is downward, and the November rate increase is unlikely to stick for too long,” Peter Sand, Chief Analyst at Xeneta said.