The Taiwan Stock Exchange has released the August 2024 revenue figures for all listed companies, with the shipping industry leading the pack, posting a 58.6% growth thanks to surging freight rates.
Coming in second was the broader electronics sector, which saw a 29.9% boost, driven by demand for AI cloud products and restocking of new customer inventories. Growth in the electronic distribution sector was fueled by a rise in AI server demand, increasing the need for electronic components.
Shipping revenues are closely tied to global freight rate fluctuations. Earlier this year, tensions in the Middle East, compounded by attacks from Houthi rebels on commercial vessels and oil tankers navigating through the Red Sea and Suez Canal, forced many shipping companies to reroute via the Cape of Good Hope, South Africa, to ports in Liverpool, Rotterdam, or Genoa.
This detour led to soaring costs in fuel, labor, and insurance, while extended transit times and lower container turnover further pushed freight rates higher. During the drought-induced low water levels in the Panama Canal, larger cargo vessels en route from Asia to US East Coast ports also had to navigate around the Cape of Good Hope.
Freight rates have been climbing sharply since May 2024. Market predictions from Drewry, Alphaliner, and Clarksons of oversupply in the 2024 shipping market were widely ignored. These analysts had forecast that new ships ordered by carriers in 2021 and 2022 would hit the market in large numbers between 2023 and 2025, with capacity expected to rise by 11% in 2024, while demand would grow by just 2-3%. Even by 2025, the sector was anticipated to remain oversupplied.
By mid-July 2024, the rally in international container rates began to fade. Drewry's World Container Index for a 40-foot container hit $5,937 on July 18 but dropped to $4,775 by September 5, representing an 8% slide in just a week.
Similarly, the Shanghai Containerized Freight Index (SCFI) has declined for three straight weeks, with freight rates for Europe and US East Coast routes falling by more than 10%. The two-month surge in freight rates has now ended earlier than expected. Although potential strikes at US ports could cause temporary disruptions, a repeat of the 2021-2022 peak rates, driven by container shortages and labor issues, is unlikely.
Shipping industry insiders note that despite the higher costs and reduced container turnover triggered by Houthi attacks, the freight rate spike has also spurred a rush to buy new and second-hand vessels, as well as empty containers. The increase in services has pushed supply higher, causing the shipping industry's peak season to arrive and end earlier than expected.
The Red Sea crisis, which sent freight rates soaring in May 2024, appears to be winding down. Many shipping companies are preparing to resume navigating the Red Sea and Suez Canal.
Foreign media reports suggest global carriers are carefully assessing the reopening of Red Sea routes. However, a swift return to these routes could overwhelm European ports, as vessels rerouted via South Africa would arrive simultaneously. Experts estimate it could take at least three months to adjust sailing schedules to the new circumstances.
