Shipping Freight Rate Rally Halts, but Rates Expected to Remain Firm

[Financial News] The rise in the shipping freight index, which continued for eight consecutive weeks from late July, has halted. However, the decline was marginal, and geopolitical and seasonal factors driving freight rates higher remain in place. As a result, many expect rates to remain firm rather than fall sharply.
According to the shipping industry on the 29th, the Shanghai Containerized Freight Index (SCFI) stood at 3682.62 as of the 24th, down 1.21 points from the previous week. This ended eight consecutive weeks of gains.
Freight indices typically begin to decline in October. This is because the peak season associated with China's Lunar New Year, the United States' Black Friday and other events ends in September. However, many expect this decline to follow a different pattern from previous years.
First, the decline was minor compared with the gains recorded so far. After surging 143.02 points on July 31, the SCFI rose for eight consecutive weeks to reach 3687.83 as of the 18th. It had climbed by about 20% over eight weeks, approaching the record high of 3733.8 recorded in 2024 during the Houthi rebels' blockade of the Red Sea.
The seasonal and geopolitical factors that pushed up freight rates also remain in place. The effects of typhoons that hit Chinese ports and drought-related reductions in slots on the Panama Canal have yet to be resolved. In addition, restrictions on passage through the Strait of Hormuz are being prolonged amid difficulties in ceasefire talks between the United States and Iran, while vessels are also unable to transit the Suez Canal because it is controlled by Houthi rebels.
With bottlenecks caused by these seasonal and geopolitical factors continuing, freight rates are not expected to decline sharply. Shipping companies are enjoying a boom as high rates persist. For HMM, South Korea's largest container shipping company, FnGuide estimates third-quarter operating profit at 601.5 billion won. That is twice the 295.8 billion won recorded in the same period a year earlier.
However, some also expect freight rates to stabilize rapidly from October. New vessels ordered in rapidly increasing numbers since 2023 are gradually being delivered, while analysts say the recent surge in cargo volumes reflects efforts to account for wars and tariff-related issues in the United States. 
[email protected] Kim Yun-ho Reporter