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Shipping costs from Asia to major international destinations have plummeted this week, driven by pivotal developments in labour negotiations and shifting seasonal demand trends. Additionally, tensions in the Middle East show tentative signs of cooling. This has signalled a possible decline in international shipping disruptions through the Red Sea, plagued by militant attacks since November 2023. 

The Freightos Baltic Index, dated October 8, reported the following week-on-week changes in booking rates:

Key takeaways: 

The resolution of the ILA-USMX contract has dispelled the risk of a January strike, which had spurred shippers to accelerate shipments in anticipation of potential disruptions. This frontloading activity had sustained elevated container rates in recent weeks, but its absence is now enabling rates to normalise.

Nevertheless, industry insiders do not foresee significant short-term declines in transpacific rates. Continued frontloading, driven by expectations of US tariff increases, is sustaining elevated shipping volumes. According to the National Retail Federation (NRF), January container volumes are projected to rise 10% year-on-year, underscoring robust demand for shipping services.

On Asia-Europe and Asia-Mediterranean routes, demand has been affected by the early conclusion of the Lunar New Year shipping rush. Reports indicated that daily freight rates have steadily decreased throughout the week amid growing expectations that rates may soon fall to $4000/FEU.

Another critical development this week is the implementation of the initial stage of the Israel-Hamas ceasefire agreement. This brings temporary relief to the 15 months of conflict that led to attacks on vessels in the Red Sea. Houthi representatives have stated that as long as the ceasefire holds, they will refrain from targeting most Red Sea traffic.

Despite reports that CMA CGM plans to increase its utilisation of the Suez Canal, the majority of carriers, shippers, and forwarders remain cautious. Many are reluctant to commit to the Red Sea route until its safety is assured.

Market adjustments following the resumption of Red Sea transits may require several weeks. The anticipated surge in capacity previously occupied by extended transit routes is expected to exert significant downward pressure on shipping rates. 

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