With the end of the Lunar Spring Festival, the latest data released by the Shanghai Container Export Index (SCFI) showed a slow recovery in the market and a general drop in container shipping prices. According to the data released on 23rd, the SCFI index dropped 56.4 points to 2109.91 points, falling to 2.6 percent. This change is consistent with market expectations, reflecting the post-partum factory’s gradual restoration of production, but the overall demand has not yet been fully released.

The drop was noticeable on major European and American routes. The data showed that the FEU fee per flight from Far East to America West dropped $142 to $4691, down by 2.93%, and the FEU fee per flight from Far East to America East dropped $325 to $6127, down by 5.03%. In addition, the flight price from Far East to Europe and the Mediterranean also showed a significant decline.

In response to market volatility, the shipping company took significant reductions in hours and schedules after the Spring Festival to stabilize shipping prices, however, Xenata chief analyst Peter Sand predicted that while shipping prices may have seen a small boost in March, they could subsequently face downward pressure again.

The shipping market has rebounded, backed by short-term shipping prices caused by the Red Sea crisis. Recent attacks on shipping vessels in the Red Sea have brought short-term profits to shipping companies, but overcapacity issues remain prominent in the long run. Shipping prices are expected to start falling in the second half of 2024, as the Red Sea shipping situation is gradually recovering.

The shipping industry has undergone substantial adjustments since its historic peak during the epidemic, with shipping company profits declining significantly in 2023.Given that container ship supply is expected to be severely excessive in 2024 and demand growth is limited, it seems unlikely that shipping prices will return to high levels during the epidemic.

In the face of current challenges, shipping companies have begun to adopt flexible shipping scheduling strategies to ensure continuity of service, bypassing service routes from Asia to Europe, the Mediterranean and the eastern coast of the United States to far-reaching good-looking routes.

The slowdown in global economic growth has impacted the consumer power of physical goods, leading to a relatively weak demand for container shipping. The total capacity of container shipping is expected to grow by 7% to 9% in 2024, while demand growth is only 2% to 4%. This unbalanced growth suggests that shipping prices may begin to decline from the second half of 2024.

Despite the pressure of shipping companies facing a decrease in profitability, due to good operating performance and accumulated high cash reserves between 2021 and 2022, some rating firms are expected to maintain net cash status in 2024.