China Securities Co.,Ltd.: Freight rates on most container shipping routes have fallen back; oil shipping freight rates remain strong.

China Securities Co.,Ltd. released a research report stating that container shipping transport demand is generally stable, with freight rates on most routes falling back. The SCFI was flat week-on-week; the US West and US East routes saw slight corrections after earlier increases, Europe and the Mediterranean continued to decline under weak demand, South America widened its decline; Southeast Asia routes saw stable demand, with the regional index continuing to rise. The international oil shipping index continued to climb, with crude tankers diverging at high levels. BDTI and BCTI rose 10.2% and 9.7% week-on-week respectively; Middle EastChina VLCC earnings edged up slightly and remained at extremely high levels, US GulfChina continued to strengthen, and West AfricaChina pulled back from highs. Product tankers remained strong, with Middle East LR long-haul route capacity relatively tight, while cross-Atlantic China Welding Consumables,Inc. MR was relatively stable. Dry bulk daily rates rose across all vessel types, with Panamax leading the gains. The BDI rose 3.1% week-on-week; Capesize was supported by Atlantic China Welding Consumables,Inc. cargo and tightening capacity, while the Pacific market was relatively under pressure; Panamax led the gains driven by increased Atlantic China Welding Consumables,Inc. cargo and tight spot capacity; Supramax and Handysize rose modestly. China Securities Co.,Ltd.'s main views are as follows: Container shipping: This week, China's export container transport demand was generally stable, the SCFI was flat week-on-week, and freight rates on most ocean-going routes fell back. The US West and US East routes saw slight adjustments after earlier increases, with supply and demand not yet clearly weakening; Europe and the Mediterranean continued to decline amid weak terminal consumption and import demand; South America saw supply-demand conditions loosen further, with the rate decline widening; the Southeast Asia market maintained stable cargo volumes, with the regional index continuing to rise. Overall, each route will continue to diverge under the influence of regional demand, capacity deployment, and geopolitical risks. Oil shipping: This week, the international oil shipping market continued its strong performance, with BDTI and BCTI rising 10.2% and 9.7% week-on-week respectively, as crude tankers shifted from broad gains to high-level divergence across routes. Navigation restrictions in the Strait of Hormuz and the southern Red Sea continued to tie up effective capacity, with Middle EastChina VLCC earnings maintaining historic highs and edging up slightly; US GulfChina continued to strengthen on long-haul cargo demand and ton-mile growth; West AfricaChina pulled back from highs after a rapid earlier rise. Product tankers remained strong, with Middle East LR long-haul route capacity relatively tight, while cross-Atlantic China Welding Consumables,Inc. MR cargo was relatively stable. Dry bulk: This week, the dry bulk shipping market rose overall, with daily rates up across all vessel types. Capesize vessels were supported by increased Atlantic China Welding Consumables,Inc. iron ore cargo and tightening spot capacity in the North Atlantic China Welding Consumables,Inc., but the relatively loose Pacific market limited gains; Panamax vessels led all vessel types, driven by increased Atlantic China Welding Consumables,Inc. grain and ore cargo and tight spot capacity; Supramax and Handysize were supported by cargo from the North Pacific, Indonesia, the US Gulf, and the East Coast of South America, with daily rates rising modestly. Overview of the shipping market Container shipping: Composite index flat, freight rates on most routes falling back This week, China's export container transport demand was generally stable, freight rates on most ocean-going routes fell back, and the composite index ended its consecutive rise. On September 24, the Shanghai Containerized Freight Index (SCFI) stood at 3,686.62 points, flat week-on-week. The market showed a divergent pattern of "Europe, the US, and South America falling back, while the Persian Gulf and Southeast Asia rose": European import demand lacked growth momentum; American route transport demand was generally stable, but spot rates adjusted after earlier increases; South America route supply-demand fundamentals weakened, with the rate decline widening further. At the same time, Middle East tensions and Red Sea security risks continued to push up the risk premium on Persian Gulf routes, while the Southeast Asia market continued to rise on stable cargo volume support. Overall, the current container shipping market lacks a unified direction, and regional demand, capacity deployment, and geopolitical risks will continue to dominate route performance. American routes: US West and US East rates fell simultaneously. The US September composite purchasing managers' index rose to 58.4, economic activity remained in expansion, and transport demand was generally stable, but the market's ability to absorb earlier rate increases weakened. On September 24, market freight rates from Shanghai Port to basic ports on the US West and US East were USD 7,463/FEU and USD 10,497/FEU respectively, down 1.3% and 0.8% week-on-week. Current US route supply and demand have not yet clearly weakened, and US East rates remain above USD 10,000. Asia-Europe and Mediterranean routes: Freight rates continued to fall, with insufficient demand-side support. The euro area September consumer confidence index fell to -16.5, with terminal consumption and import demand remaining weak. This week, market cargo volumes lacked further growth momentum. On September 24, the market freight rate from Shanghai Port to basic ports in Europe was USD 2,313/TEU, down 4.6% week-on-week; Mediterranean basic ports were USD 3,065/TEU, down 1.9% week-on-week. Against the backdrop of slow demand recovery and insufficient market booking willingness, shipping companies' capacity control measures have not yet reversed the downward rate trend, and the Europe route is expected to remain weak in the short term. Latin America routes: South America rates fell sharply. On September 24, the market freight rate from Shanghai Port to basic ports in South America was USD 6,530/TEU, down 15.2% week-on-week, the largest decline among major routes this week. Current transport demand growth is weak, market supply-demand conditions have loosened further, and cargo owners' wait-and-see sentiment along with shipping companies' competition for cargo have jointly pushed spot quotes lower. In the short term, downward pressure on South America route rates has not yet fully dissipated. Intra-Asia routes: Southeast Asia rates continued to rise, with divergent performance by route. The Southeast Asia Containerized Freight Index stood at 5,794.79 points, up 3.3% week-on-week. Regional transport demand was generally stable, but cargo volumes and capacity supply-demand differed across routes, with market rates mixed. Overall, the Southeast Asia market still has stable cargo volume support and is expected to remain rangebound at high levels in the short term. Oil shipping: Index continued to rise week-on-week, VLCCs diverged at high levels This week, the international oil shipping market continued its strong performance, but crude tanker routes began to diverge. On September 24, the BDTI stood at 5,250 points, up 10.2% week-on-week; the BCTI stood at 2,099 points, up 9.7% week-on-week. Navigation restrictions in the Strait of Hormuz and the southern Red Sea continued to disrupt Middle East crude exports, with Gulf transshipment, offshore lightering, and vessel waiting occupying substantial effective capacity, keeping risk premiums at high levels. However, after the earlier rapid rise, transaction pace slowed on some VLCC routes, with the market shifting from broad gains to high-level divergence. Middle East routes: Middle EastChina VLCC earnings rose slightly at high levels. On September 24, the TCE on the Middle East GulfChina TD3C route was about USD 1,235,400/day, up 1.9% week-on-week. Although the tug-of-war between shipowners and charterers intensified at extremely high freight levels, navigation restrictions in the strait, transshipment delays in the Gulf of Oman, and a large number of vessels tied up in waiting and lightering operations kept effective capacity tight, with rates still at historic highs. US Gulf routes: US GulfChina rates continued to rise. On September 24, the TCE on the US GulfChina TD22 route was about USD 407,100/day, up 4.8% week-on-week. Disruption to the Middle East supply chain prompted buyers to increase focus on long-haul American cargo, with longer voyages further amplifying ton-mile demand; at the same time, a large number of VLCCs were absorbed by Middle East and Gulf of Oman business, supporting Atlantic China Welding Consumables,Inc. cross-regional route rates. West Africa routes: West AfricaChina rates pulled back from highs. On September 24, the TCE on the West AfricaChina TD15 route was about USD 507,100/day, down 3.3% week-on-week. After the earlier rapid rate increase, charterers' acceptance declined and market transactions slowed, but the capacity siphoning effect from the Middle East remained, available vessel supply in West Africa was limited, and the absolute rate level remained high. Product tankers: Market remained strong, with LR long-haul routes standing out. The BCTI rose 9.7% week-on-week, LR2 and LR1 vessel supply in the Middle East was relatively tight, and long-haul routes continued to receive support; cross-Atlantic China Welding Consumables,Inc. MR cargo was relatively stable, with performance diverging across regions. In the short term, geopolitical conflicts and the restructuring of refined product trade flows will continue to support the product tanker market. Dry bulk market: Daily rates rose across all vessel types, with Panamax leading This week, the dry bulk shipping market rose overall, with Panamax leading gains, Capesize fluctuating at high levels, and Supramax and Handysize rising modestly. On September 24, the Baltic Dry Index (BDI) stood at 3,473 points, up 3.1% week-on-week; Capesize daily rates were USD 53,864/day, up 3.0% week-on-week; Panamax was USD 21,434/day, up 5.8% week-on-week; Supramax was USD 22,525/day, up 0.9% week-on-week; Handysize was USD 18,061/day, up 1.6% week-on-week. Capesize vessels were supported by increased Atlantic China Welding Consumables,Inc. iron ore cargo and tightening spot capacity in the North Atlantic China Welding Consumables,Inc., with daily rates continuing to rise, but relatively loose cargo-capacity matching in the Pacific market limited overall gains. Panamax performed strongest, driven by increased Atlantic China Welding Consumables,Inc. grain and ore cargo and tight spot vessel supply, with Australian and North Pacific cargo also providing support, while Indonesian coal market activity recovered somewhat. Supramax rose modestly on support from North Pacific and Indonesian cargo and European scrap transport demand; Handysize performed relatively steadily, driven by inquiries from the US Gulf and the East Coast of South America. Overall, all vessel types received cargo support, but regional performance still differed, and high-level fluctuations are expected to continue in the short term. Review: Freight rates rose sharply in the first half of 2026, the Strait of Hormuz blockade pushed up fuel costs, tariff front-loading triggered an "early peak season," and multiple factors combined to create a market of rising volumes and prices In the first quarter, after the Spring Festival at the start of the year, the container shipping market entered its traditional off-season, and freight rates fell back normally. But by the end of February, the US-Iran conflict suddenly broke out, the Strait of Hormuz was blockaded, international oil prices rose sharply, fuel costs surged, and companies were forced to pass fuel costs on to freight, driving rates sharply higher; at the same time, to avoid the adverse effects of the war, several shipping companies diverted Suez Canal routes to the Cape of Good Hope, greatly lengthening voyages and reducing effective capacity supply; combined with shipping companies imposing war surcharges, global route rates soared in a short period, with the SCFI composite index rising about 37% within one month after the war broke out. Entering the second quarter, the impact of Middle East geopolitical conflicts on freight rates continued, and the "rush to ship" triggered by tariff policy adjustments pushed container shipping rates continuously higher. By route, South America routes were affected by Brazil's partial tariff increase on June 1, with merchants concentrated on early shipments, route capacity tightened, and the South America route SCFI index nearly doubled in May; North America routes were affected by policy factors including the July 24 re-imposition of US Section 301 tariffs and the upcoming implementation of new US Consumer Product Safety Commission (CPSC) rules, with the "rush to ship" erupting in May, and within one month the US West and US East route SCFI indices rose 52.4% and 44.5% respectively; Southeast Asia routes and Africa routes saw rates continue to rise due to increased trade volumes; in addition, some Southeast Asian ports were hit by both power shortages and port congestion, further intensifying capacity tightness and pushing up route rates; at the same time, because American route demand surged and profits were rich, a large amount of vessel and container resources originally scheduled for Southeast Asia and Europe routes were siphoned away, causing other global routes to passively reduce capacity and pushing up the overall global freight rate level; Persian Gulf routes saw rates rise due to geopolitical conflict factors, with actual volume only about 40% of the same period. Overall, shipping companies achieved profitability levels exceeding market expectations in the first half of 2026. From the perspective of trade volumes, Asia's trade volume to North America declined in 2025, but growth in trade volumes to Africa, South America, Southeast Asia, and Europe offset the decline on North America routes. In January-April 2026, Asia's trade volumes to Africa and Oceania grew 28.23% and 16.67% year-on-year respectively; affected by the rush to ship caused by Brazil's tariff adjustment, Asia's trade volume to South America grew 18.36%; on the European side, benefiting from a sharp increase in demand for new energy-related products, which effectively filled the gap left by traditional products, trade volume rose 14.27% year-on-year; affected by the expiration of the July US tariff policy node, Asia's trade volume to North America surged in May, growing about 18% year-on-year. Overall, the container shipping market in the first half showed a trend of rising volumes and prices. Outlook: Freight rates are expected to peak and fall back in the second half of the year; over the medium to long term, rate volatility will increase, with the center remaining at a relatively high level (1) Middle East conflict cooling, falling fuel costs, and the implementation of American country tariff policies create a strong expectation that rates will peak and fall back from high levels On June 22, the US and Iran signed a memorandum of understanding, announcing a 60-day ceasefire in the strait, after which Iran announced that strait navigation would resume, geopolitical risk expectations fell sharply, and international oil prices quickly retreated, returning to pre-conflict levels by June 26, greatly reducing shipping companies' fuel costs; at the same time, as Brazil's tariff reform formally landed and the US tariff adjustment policy node approached, rush-shipping demand will weaken, the demand side will return to normal shipment pace, and capacity tightness will ease; lower fuel costs combined with demand returning to normal create a strong short-term expectation of container shipping rate declines. (2) Supply side favorable in the short term, under pressure in the medium to long term; Red Sea resumption remains the decisive factor In terms of new supply, about 1.5 million TEU of capacity is expected to be delivered in 2026, with nominal capacity growth of about 3.7%, the lowest in the past three years; however, 2027, 2028, and 2029 are expected to deliver 3.4 million, 3.7 million, and 2.5 million TEU respectively, and the supply side will face greater pressure in the future. However, the proportion of vessels over 15 years old in the industry is currently 36%, and the proportion over 20 years old is 16%. If the market can effectively phase out vessels over 20 years old gradually over the next five years, then market capacity supply will not fluctuate significantly. In the medium to long term, the impact of new supply on the market is somewhat uncertain, and whether the Red Sea can resume normal navigation remains the decisive factor. The Red Sea crisis caused the global container shipping fleet to lose about 10% of its capacity; a Red Sea resumption would release a large amount of capacity in the short term and intensify port congestion, but medium- to long-term supply increases will still put considerable pressure on freight rates. (3) Uncertainty in various countries' tariff policies toward China will continue to disrupt freight rates China's exports were strong in the first half of 2026. In the first five months of 2026, China's total goods exports were RMB 11,913.7 billion, up 11.8% year-on-year. In the first five months, China's exports to ASEAN, the EU, and "Belt and Road" countries grew 13.5%, 7.7%, and 10.4% respectively. In the first five months of 2026, container throughput at China's major ports all rose, with throughput growth at major foreign trade container ports reaching more than 7%. China's trade surplus already hit a record high in 2025, and the rapid export growth in the first half of 2026 is expected to further raise China's trade surplus level. In May 2026, China's trade surplus was USD 105.43 billion, higher than USD 102.72 billion in the same period of 2025. The continued rise in the trade surplus may trigger changes in other countries' tariff policies toward China. At present, some countries continue to strengthen scrutiny of Chinese goods. The EU has already continued to advance trade investigations in areas such as electric vehicles, steel, and CECEP Solar Energy, and ASEAN countries are also increasingly wary of Chinese goods using the region for "transshipment bypass" exports to Europe and the US. In the future, tariff actions targeting Chinese exports may become more frequent. Frequent tariff disruptions will increase freight rate uncertainty. Whenever a tariff window approaches, cargo owners concentrate on early shipments, capacity quickly tightens, and spot rates surge rapidly; after the window closes, the overdrawn demand forms a vacuum, and rates quickly fall back. The repeated recurrence of this pattern makes the traditional concept of peak and off seasons disappear, the freight rate cycle will be disrupted by tariff policy nodes, and the magnitude of freight rate fluctuations will expand significantly. (4) Container port congestion becoming normalized, container turnover efficiency declining, and supply chain uncertainty increasing In recent years, global port congestion has gradually increased. Current global port congestion levels have already matched those during the global public health event period. Among this, Northeast Asia has the most severe port congestion, accounting for 40% of total congested capacity, while Southeast Asia and the Mediterranean each account for 10% of total congested capacity. The root cause of port congestion lies in the continued expansion of the container fleet over the past few years and the long-term lag in port infrastructure investment. In addition, port congestion lengthens container dwell time at ports and exacerbates the geographical mismatch of empty containers, making actual available container volume significantly lower than the nominal number; combined with disruptive factors such as extreme weather and strikes, container capacity losses are difficult to effectively repair in the short term, objectively forming a sustained hidden constraint on capacity supply in the global container shipping market. Overall, there is a strong expectation that container shipping rates will fall back from high levels in the second half of 2026. In the short term, both demand and costs are weakening simultaneously. The rush-shipping wave in the first half overdrew subsequent cargo demand, creating a transport demand vacuum; at the same time, falling oil prices lower shipping companies' operating costs and weaken their incentive to maintain high freight rates. The combination of these two factors together constitutes the reason for freight rate declines in the second half of the year. In the medium to long term, the Red Sea resumption process on the supply side remains the decisive variableonce normal navigation resumes, diverted capacity will return on a large scale, and effective supply will expand significantly; the concentrated delivery of new capacity in 2027-2029 will also intensify supply pressure, but the share of elderly vessels in the global fleet is relatively high, and if the elimination of aging capacity accelerates, it can offset part of the new supply and keep total capacity within a relatively reasonable range. On the demand side, China's exports maintain a growth trend, and the outlook is relatively optimistic; adjustments in various countries' tariff policies toward China will disrupt enterprises' shipment pace, and combined with factors such as tightening of China's export tax rebate policy, periodic rush-shipping behavior may become the new normal, increasing freight rate volatility. Taken together, container shipping market freight rates will come under pressure in the second half of 2026. Looking at a longer cycle, factors such as tariff policy gaming, geopolitical disruptions, and global port congestion are intertwined, supply chain uncertainty continues to rise, the traditional cyclical pattern of freight rates tends to weaken, and volatility increases. Nevertheless, the long-term growth underpinning demand and rigid supply-side constraints have not fundamentally reversed, and the freight rate center still has the fundamental support to remain at a relatively high level. Oil shipping: Gradually moving toward a compliance bull market The Russia-Ukraine conflict changed the global crude oil supply landscape. Due to constraints on Russian oil, the EU and other countries greatly reduced dependence on Russian oil, and Russian oil shifted to supplying Asia. At the same time, other oil producers such as the US and Brazil are expanding output, and some African countries have withdrawn from OPEC, causing OPEC's share to gradually decline while leaving market space for other countries to increase production. Entering 2025, OPEC changed its previous production cut strategy, shifted to production increases, and entered a stage of substantive production increases. Although production increases do not necessarily mean an increase in seaborne crude exports, actual seaborne trade volume data observed since August has indeed increased, effectively driving a substantial rise in crude tanker freight rates. Although China's seaborne crude imports were weak in 2024 and early 2025, the trend in recent months has been stronger, with third-quarter imports up 5% year-on-year. Firm refinery throughput also provided an additional boost to imports. In 2025, about 14.8 million barrels/day of crude were processed on average, up 3% year-on-year, with third-quarter throughput up 7% year-on-year. In the first half of this year, higher import taxes on fuel oil and asphalt supported this momentum, prompting independent refiners to shift toward processing more crude. Growing demand for petrochemical feedstocks also provided support, while refinery maintenance schedules have decreased in recent months, especially at state-owned plants. Significantly accelerated inventory activity and increased refinery throughput drove stronger import demand, and the increase in Chinese cargo volumes also provided underlying support for the crude tanker market this year. China's crude oil inventory days of cover rose to 110 days, and so far China's strategic petroleum reserve plus commercial inventories have increased by 150 million barrels, worth about USD 10 billion. It is expected to rise to 140-180 days in the future, mainly because: (1) current oil prices are at relatively low historical levels, providing a window for strategic purchases; (2) the new Energy Law effective in 2025 requires both state-owned and private enterprises to jointly assume strategic reserve obligations, creating institutional accumulation momentum; (3) about 20-30% of oil imports come from countries sanctioned by Europe and the US, posing supply disruption risks, and increasing reserves is preparation for potential crises (including geopolitical situations, etc.); (4) a large current account surplus provides foreign exchange funds for purchasing crude oil. Refining capacity continues to expand (expected to exceed 18 million barrels/day in 2026), supporting crude oil demand. Sustained inventory momentum may support imports into 2026, state-owned oil companies will further increase crude oil storage capacity by 169 million barrels, and a further slowdown in oil prices may also provide support. China's seaborne crude imports were initially expected to grow 3% next year to 10.7 million barrels/day, but there may be further upside. Due to expanded sanctions by Europe and the US on the shadow fleet, especially since the beginning of 2025 when the US increased sanctions on the shadow fleet, effective capacity in the market has shrunk, pushing up the freight rate center and also increasing rate elasticity during peak seasons. At present, about 16% of the VLCC fleet consists of restricted vessels, and in particular the share of Aframax vessels closely linked to Russia has reached 33%. Although newbuilding prices have recently pulled back somewhat, the overall transaction value of secondhand vessels is still rising, which is related to the recent sharp increase in charter rates. Assuming a 10-year-old vessel with a 2015 newbuilding price of about USD 95 million, calculated on a 20-year depreciation basis with no residual value, its current book value is USD 47.5 million, but its market value has reached USD 88 million, an appreciation rate of 85%. Although supply pressure will increase somewhat in 2026, which will limit the height of freight rates, aging remains severe, and the freight rate center is gradually shifting upward. Special transport: Exports of the "new three" items drive market demand, and the prosperity of special cargo exports continues As of August 2025, China's total exports of clean energy technology hit a new high, with total value exceeding USD 141 billion. Europe is almost the largest import region for China's clean energy products. The Middle East, Latin America, and Africa are the regions with the greatest future growth potential. Due to the increasing size of new energy equipment, product transport is gradually shifting from containerized transport to special cargo transport, especially products such as wind power equipment and energy storage cabinets. Risk warnings Policy risks arising from changes in global liner alliance regulatory policies Facing the situation of high freight rates in the container shipping market, the US National Industrial Transportation League (NITL) and others have pressured to intervene in liner alliances' antitrust exemptions. In the short term, there is little evidence that liner alliances have engaged in monopolistic pricing behavior; the EU has consistently refused to take intervention action against liner companies, believing that shippers enjoy benefits brought by liner alliances such as increased sailing frequency, broader route coverage, and fewer transshipments. In the medium to long term, if high freight rates in the container shipping industry persist, the US government or the EU may re-examine the existence of global liner alliances, or there may be risks of container shipping market volatility caused by changes in global liner alliance regulatory policies. Global trade risks under continued escalation of the Russia-Ukraine conflict The current Russia-Ukraine conflict remains deadlocked, which will seriously affect trade on routes related to Europe and Russia, bring about a collapse of the global shipping system, and even create a risk of reversal in the globalization process. Investors are advised to closely monitor battlefield developments, energy policies, and sanction dynamics. Iran regional conflict risk If the Iran regional conflict continues, it will affect global energy-related routes and bring negative effects on the global energy transport system. Investors are advised to closely monitor battlefield developments, energy policies, and sanction dynamics. Large increases in fuel costs Affected by fluctuations in international crude oil prices, shipping companies' fuel costs face the risk of large increases. Second, Singapore is the world's largest consumer and distribution center for fuel oil, and geopolitics may affect Singapore's fuel oil production, thereby causing fuel costs to rise sharply. Finally, environmental regulations and policies of the IMO and various governments may significantly increase shipping companies' fuel costs. Historically, the 2020 global sulfur cap brought huge changes to the consumption structure of the bonded marine fuel market, and alternative fuels such as low-sulfur fuel oil, MGO, and LNG clean energy all greatly increased marine fuel costs, thereby bringing severe price fluctuations.