Carriers Scrap February General Rate Increase as Freight Demand Weakens

Continuing uncertainty in international markets have not been eased by the arrival of the US carrier group into the Middle East, forcing container operators to shelve rate increases.

The arrival of the aircraft carrier USS Abraham Lincoln and its escorts into the troubled region was, seemingly, enough for French operator CMA CGM to reverse its decision to return its Asia-Europe FAL1, FAL3 and MEX services to the Suez Canal, with these services now sailing around the Cape of Good Hope again.

Forbes reported on 26 January: “Even as the deployment of [the carrier group] CSG-3 was meant to promote stability, the arrival of the carrier and escorts could result in just the opposite. Yemen's Iranian-backed Houthi rebels threatened to resume attacks on commercial ships in the Red Sea in response to the US military build-up.”

Without that predictability markets can be volatile, and consultant Linerlytica reports this week that the SCFI, which fell 7.4% last week, is expected to record further declines ahead of Chinese New Year, which starts on 17 February, as carriers “slash rates more aggressively before the holidays”.

“Carriers taking the decision to return to the Red Sea then reversing that decision — even if it is done for important safety reasons — still risks undermining confidence in schedule reliability and eroding trust in partnerships,” said Ozuygur.

Heightened tensions in the Middle East will not be enough to prevent the slide in rates, states Linerlytica, who added that rates are expected to remain weak even after CNY.

“The benchmark April 2026 EC freight futures is trading at a 35% discount to the latest SCFIS index from Shanghai to North Europe even after last week’s futures market rally with freight rates expected to remain below current levels for the rest of this year,” said the consultant.

Carriers are reportedly slashing rates in a bid to fill slots on both the Asia to Europe and Pacific trades, reversing all the rate increases achieved in January’s European services, which are now under $2,500/feu.

Increasingly weak demand will see spot rates slip further to below $2,200/feu for February shipments as carriers look to build cargo pools ahead of the holidays, forcing them to “abandon plans for a further rate hike on 1 February”.

A similar situation is apparent on the Pacific as SCFI recorded spot rates sliding to $2,082/feu to the US West Coast as carriers maintain low rates until the end of February “as hopes fade for another rate hike before the Chinese New Year”.

By: Seatrade Maritime