On the back of their earnings release Maersk CEO Vincent Clerc said today that the company expects the shipping industry to be hit by a slowdown later this year when the current boost to freight rates from the Red Sea conflict evaporates. Clerc goes on “While the Red Sea crisis has caused immediate capacity constraints and a temporary increase in rates, eventually the oversupply in shipping capacity will lead to price pressure and impact our results”. Ouch… 

Looking at this week’s freight rate updates, we saw a w/w drop in freight rates for the second week running. Are we beginning to see the first signs of weakness in European demand at these price levels? It is definitely worth watching as history suggests we are most likely to see a positive correlation between European and American freight rates with a 1-2 weeks lag. Comparing consumer data from Europe and the US, it does indeed also look like the Americans can weather the storm better.   

 Chart 1.a: Second straight w/w drop in freight rates

Chart 1.b: Will we see American freight rates react?