Freight Rates Stabilise But Oversupply Risk Looms

Insight Focus

Controlled Rebound Amid Structural Weakness

Global container freight rates over the past month have stabilised at mid-cycle levels, with early May showing a modest rebound following April softening. Drewry’s World Container Index (WCI) rose ~3% in early May to USD 2,286/FEU after several prior weekly declines, reflecting incremental rate firming on key east–west lanes.

Source: Drewry

This leaves benchmark global pricing broadly in the USD 2,100–2,300/FEU range, consistent with April averages and far below pandemic peaks but still elevated year-on-year. The Containerized Freight Index has also climbed ~3% month-on-month, indicating a gradual upward drift into pre-peak season.

Critically, pricing strength has been policy-driven, not demand-led. Emergency fuel surcharges (EFS) and peak-season surcharges (PSS) are pushing rates up, particularly on transpacific routes, while underlying demand remains soft.

MSC last week updated its EFS for Red Sea and Africa routes for cargoes with bills of lading dated May 16 to May 31.

Resilient Volumes but Fragmented Routing

Global container flows show modest but steady growth, with Q1 throughput indicating stable demand across Asia–Europe and transpacific corridors. However, routing patterns have become increasingly fragmented due to geopolitical disruptions.

Middle East instability (especially the effective closure of the Strait of Hormuz) has halted normal Gulf routing, forcing cargo to shift to alternative discharge hubs and land-bridge solutions. At the same time, Red Sea/Suez disruptions continue to divert vessels around the Cape of Good Hope, extending transit times and absorbing capacity.

In addition, there is rising congestion at Southeast Asian transshipment hubs like Singapore and increased booking volatility. Port delays – caused primarily by the Middle East conflict – have led to rerouting and uneven arrivals.

Source: S&P Global

This has resulted in longer supply chains, higher costs and uneven capacity distribution, even as overall global flows remain relatively stable. These factors are increasing hidden supply chain costs and transit uncertainty, even where nominal vessel capacity exists.

Rate Differentials: Wide Spreads Across Major Lanes

Pronounced rate differentials persist between headhaul and backhaul lanes and across regions. As of early May:

• Asia → US East Coast: ~USD 3,600–3,800/FEU

• Asia → US West Coast: ~USD 2,700–3,000/FEU

• Asia → Europe: ~USD 2,100–3,000/FEU

Backhaul rates remain significantly lower, with Drewry recording Los Angeles to Shanghai at USD 792/FEU and Rotterdam to Shanghai at USD 631/FEU as of May 7. This reinforces structural imbalances in container flows.

Source: Drewry

Short-term volatility is also widening intra-Europe and niche lane spreads, with some China–Mediterranean or secondary European routes rising by 30–50% weekly due to capacity repositioning. However, arbitrage remains tactical rather than structural, as pricing is increasingly influenced by carrier-controlled levers rather than pure market mechanisms.

Oversupply Masked by Capacity Discipline

Structurally, the market remains oversupplied. Fleet growth continues to outpace demand growth at about 3-4% versus approximately 2%, maintaining downward pressure on rates.

Yet carriers are actively preventing rate erosion through slow steaming and route restructuring, as well as service rationalisation and alliance adjustments. Another mechanism to normalise rates is through blank sailings and cancellations. Although these have been reported at around 6% in late-April, Drewry’s cancelled sailings tracker shows conditions gradually improving.

According to the tracker, “blank sailings projected to decline from 59 in April to 49 in May and further to 30 in June, alongside a 4% MoM increase in East–West capacity.”

Meanwhile, demand conditions remain stable but subdued, driven by inventory normalisation following 2025 front-loading, slower global trade growth and weak container-intensive sectors. Importantly, recent rate increases are not backed by volume surges. Instead, they reflect cost inflation (fuel) and carrier pricing strategy.