China Securities Co.,Ltd.: Freight rates on most container shipping routes have fallen back, while tanker shipping 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; US West and US East routes saw slight corrections after earlier gains, Europe and the Mediterranean continued to decline amid weak demand, South America saw its decline widen; Southeast Asia routes had stable demand, with the regional index continuing to rise. The international tanker 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 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. BDI rose 3.1% week-on-week; Capesize was supported by Atlantic China Welding Consumables, Inc. cargoes and tightening capacity, while The Pacific market was relatively under pressure; Panamax led the gains driven by increased Atlantic China Welding Consumables, Inc. cargoes and tight spot capacity; Supramax and Handysize rose moderately. China Securities Co., Ltd.'s main views are as follows: Container shipping: This week, China's export container shipping demand was generally stable, with the SCFI flat week-on-week and freight rates on most ocean-going routes falling back. US West and US East routes underwent slight adjustments after earlier gains, 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 decline in freight rates 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. Tanker shipping: This week, the international tanker 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-based 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 historical 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 cargoes were 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 cargoes and tightening spot capacity in North Atlantic China Welding Consumables, Inc., but the relatively loose The Pacific market limited gains; Panamax vessels led all vessel types in gains, driven by increased Atlantic China Welding Consumables, Inc. grain and ore cargoes and tight spot capacity; Supramax and Handysize vessels were supported by cargoes from North The Pacific, Indonesia, the US Gulf, and the East Coast of South America, with daily rates rising moderately. Overall Shipping Market Conditions Container shipping: Composite index flat, freight rates on most routes falling back This week, China's export container shipping demand was generally stable, with freight rates on most ocean-going routes falling back and the composite index ending 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, America, and South America falling back, while the Persian Gulf and Southeast Asia rising": European import demand lacked growth momentum; American route transport demand was generally stable, but spot rates adjusted after earlier gains; South America route supply-demand fundamentals weakened, with the decline in freight rates widening further. Meanwhile, 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 freight rates fell simultaneously. The US September composite purchasing managers' index rose to 58.4, with economic activity remaining in expansion and transport demand generally stable, but the market's ability to absorb earlier freight rate increases weakened somewhat. On September 24, market freight rates from Shanghai Port to US West and US East base ports were $7,463/FEU and $10,497/FEU respectively, down 1.3% and 0.8% week-on-week. Current US route supply and demand have not yet clearly weakened, with US East freight rates still above $10,000. Asia-Europe and Mediterranean routes: Freight rates continued to fall, with insufficient demand-side support. The eurozone 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 Europe base ports was $2,313/TEU, down 4.6% week-on-week; Mediterranean base ports were $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 freight rate trend, and the Europe route is expected to remain weak in the short term. Latin America routes: South America freight rates fell sharply. On September 24, the market freight rate from Shanghai Port to South America base ports was $6,530/TEU, down 15.2% week-on-week, the largest decline among major routes this week. Current transport demand growth is sluggish, market supply-demand conditions have loosened further, and cargo owner wait-and-see sentiment along with shipping companies' cargo solicitation competition have jointly pushed spot quotes lower. In the short term, downward pressure on South America route freight rates has not yet fully dissipated. Intra-Asia routes: Southeast Asia freight rates continued to rise, with divergent performance across routes. 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 conditions differed across routes, with market freight rates mixed. Overall, the Southeast Asia market still has stable cargo volume support and is expected to maintain high-level fluctuations in the short term. Tanker shipping: Index continued to rise week-on-week, VLCC diverging at high levels This week, the international tanker shipping market continued its strong performance, but crude tankers began to diverge across routes. 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 oil 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 on some VLCC routes slowed, with the market shifting from broad-based gains to high-level divergence. Middle East routes: Middle EastChina VLCC earnings edged up at high levels. On September 24, the TCE on the Middle East GulfChina TD3C route was approximately $1,235,400/day, up 1.9% week-on-week. Although the game between shipowners and charterers intensified at extremely high freight rate levels, strait navigation restrictions, Gulf of Oman transshipment delays, and a large number of vessels tied up in waiting and lightering operations kept effective capacity tight, with freight rates still at historical highs. US Gulf routes: US GulfChina freight rates continued to rise. On September 24, the TCE on the US GulfChina TD22 route was approximately $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 sources, with longer voyages further amplifying ton-mile demand; meanwhile, a large number of VLCCs were absorbed by Middle East and Gulf of Oman operations, supporting Atlantic China Welding Consumables, Inc. cross-regional route freight rates. West Africa routes: West AfricaChina freight rates pulled back from highs. On September 24, the TCE on the West AfricaChina TD15 route was approximately $507,100/day, down 3.3% week-on-week. After the earlier rapid rise in freight rates, charterers' acceptance capacity declined, and market transactions slowed, but the Middle East capacity absorption effect remains, with limited available vessel supply in West Africa, and absolute freight rate levels still relatively high. Product tankers: Market remained strong, with LR long-haul routes performing notably well. The BCTI rose 9.7% week-on-week, with LR2 and LR1 vessel supply in the Middle East relatively tight, and long-haul routes continuing to receive support; cross-Atlantic China Welding Consumables, Inc. MR cargoes were relatively stable, with divergent performance 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 vessels leading gains, Capesize vessels fluctuating at high levels, and Supramax and Handysize vessels rising moderately. On September 24, the Baltic Dry Index (BDI) stood at 3,473 points, up 3.1% week-on-week; Capesize daily rates were $53,864/day, up 3.0% week-on-week; Panamax was $21,434/day, up 5.8% week-on-week; Supramax was $22,525/day, up 0.9% week-on-week; Handysize was $18,061/day, up 1.6% week-on-week. Capesize vessels were supported by increased Atlantic China Welding Consumables, Inc. iron ore cargoes and tightening spot capacity in North Atlantic China Welding Consumables, Inc., with daily rates continuing to rise, but the relatively loose matching of cargoes and capacity in The Pacific market limited overall gains. Panamax vessels performed strongest, with increased Atlantic China Welding Consumables, Inc. grain and ore cargoes, tight spot vessel supply, and support from Australian and North The Pacific cargoes, while Indonesian coal market activity recovered somewhat. Supramax vessels rose slightly on support from North The Pacific and Indonesian cargoes and European scrap steel transport demand; Handysize vessels 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 with rising volumes and prices In the first quarter, after the Spring Festival, the container shipping market entered its traditional off-season, and freight rates fell back normally. But by late February, the US-Iran conflict suddenly erupted, the Strait of Hormuz was blockaded, international oil prices rose sharply, fuel costs surged, and companies were forced to pass on fuel costs to freight rates, driving a sharp rise in rates; at the same time, to avoid the adverse effects of war, several shipping companies diverted routes through the Suez Canal to the Cape of Good Hope, greatly lengthening voyages and reducing effective capacity supply; combined with shipping companies imposing war surcharges, global route freight rates soared in a short period, with the SCFI composite index rising about 37% within one month of the outbreak of war. Entering the second quarter, the impact of Middle East geopolitical conflicts on freight rates persisted, and the "rush shipping wave" 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 policies including the July 24 re-imposition of tariffs under US Section 301 and the upcoming implementation of new US Consumer Product Safety Commission (CPSC) regulations, with the "rush shipping wave" 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 freight 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 freight rates; meanwhile, because American route demand surged and profits were, a large number of vessels and container resources originally scheduled for Southeast Asia and Europe routes were siphoned off, causing other global routes to passively reduce capacity and pushing up the overall global freight rate market; Persian Gulf routes saw freight rates rise due to geopolitical conflict factors, with actual volumes only about 40% of the same period. Overall, shipping companies achieved profit levels exceeding market expectations in the first half of 2026. From a trade volume perspective, 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 rush shipping due to Brazil's tariff adjustment, Asia's trade volume to South America grew 18.36%; Europe benefited from a substantial increase in demand for new energy products, effectively filling the gap left by traditional products, with trade volume rising 14.27% year-on-year; affected by the expiration of the US tariff policy node in July, 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, with medium- to long-term volatility increasing and the center remaining at relatively high levels (1) Middle East conflict cooling, falling fuel costs combined with the landing of American country tariff policies, expectations for freight rates to peak and fall back from highs are relatively strong 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, international oil prices quickly retreated, and by June 26 had fallen back to pre-conflict levels, greatly reducing shipping companies' fuel costs; at the same time, as Brazil's tariff reform officially landed and the US tariff adjustment policy node approached, rush shipping demand will weaken, the demand side will return to normal shipping rhythms, and capacity tightness will ease; lower fuel costs combined with demand returning to normal create relatively strong expectations for short-term container shipping freight rates to fall back. (2) Supply side favorable in the short term, under pressure in the medium to long term, Red Sea resumption remains the decisive factor From the perspective of new supply, 2026 is expected to deliver 1.5 million TEU of capacity, 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 current industry proportion of old vessels over 15 years is 36%, and the proportion over 20 years is 16%. If the market can effectively phase out old vessels over 20 years 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 has some uncertainty, 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, and 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 disturb 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 above 7%. China's trade surplus had 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 $105.43 billion, higher than $102.72 billion in the same period of 2025. The continued increase 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 "transshipping around" through the region to export to Europe and America. In the future, tariff actions targeting Chinese exports may become more frequent. Frequent tariff disturbances will increase freight rate uncertainty. Whenever a tariff window approaches, cargo owners concentrate on early shipments, capacity quickly tightens, and spot freight rates surge rapidly; after the window closes, the overdrawn demand forms a vacuum, and freight rates quickly fall back. The repeated recurrence of this pattern makes the traditional peak and off-seasons disappear, and the freight rate cycle pattern will be disrupted by tariff policy nodes, with the magnitude of freight rate fluctuations significantly expanding. (4) Container port congestion becoming normalized, container turnover efficiency declining, 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, with Northeast Asia suffering 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 empty container geographic mismatches, making actual available container volumes significantly lower than nominal volumes; combined with disturbances 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, expectations are relatively strong for container shipping freight rates to fall back from highs 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, forming a transport demand vacuum; at the same time, falling oil prices lowered shipping companies' operating costs and weakened their incentive to maintain high freight rates. The combination of these two factors together constitutes the basis for freight rates to fall back in the second half. 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 20272029 will also intensify supply pressure, but the relatively high proportion of elderly vessels in the global fleet means that 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 disturb companies' shipment rhythms, and combined with factors such as tightening of China's export tax rebate policy, periodic rush shipping behavior may become the new normal, with freight rate volatility increasing. 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 disturbances, 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 of demand and rigid constraints on the supply side have not fundamentally reversed, and the freight rate center still has fundamental support to remain at relatively high levels. Tanker 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-producing countries such as the US and Brazil are expanding production, 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, turning to production increases and entering a substantive production increase phase. Although production increases do not necessarily mean an increase in seaborne crude oil exports, actual seaborne trade volume data observed since August has indeed increased, effectively driving a substantial upward move in crude tanker freight rates. Although China's seaborne crude oil 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 oil were processed on average, up 3% year-on-year, with third-quarter processing 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 oil. Growing demand for petrochemical feedstocks also played a supporting role, 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 $10 billion. It is expected to rise to 140-180 days in the future, mainly because: (1) current oil prices are at historically relatively low 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 America, creating supply disruption risks, and increasing reserves is preparation for potential crises (including geopolitical situations, etc.); (4) large current account surpluses provide 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, with state-owned oil companies expected to further increase crude oil storage capacity by 169 million barrels, while a further slowdown in oil prices may also provide support. China's seaborne crude oil 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 America 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 freight rate elasticity during peak season. Currently about 16% of the VLCC fleet consists of restricted vessels, and in particular the proportion of Aframax vessels closely related to Russia has reached 33%. Although newbuilding prices have recently declined somewhat, overall secondhand vessel transaction values are still rising, which is related to the recent substantial increase in charter rates. Assuming a 10-year-old vessel, with a newbuilding price of about $95 million in 2015, calculated on a 20-year depreciation basis without considering residual value, its current book value is $47.5 million, but its market value has reached $88 million, a value appreciation rate of 85%. Although supply pressure will increase somewhat in 2026, limiting the height of freight rates, aging remains severe, and the freight rate center is gradually shifting upward. Special transport: New three items exports drive market demand, special cargo export prosperity continues As of August 2025, China's total clean energy technology exports hit a new high, with total value exceeding $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 large-scale development of new energy equipment, product transport is gradually shifting from containerized transport to special cargo transport, especially for products such as wind power equipment and energy storage cabinets. Risk warnings Policy risks arising from changes in global liner alliance regulatory policies Facing 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 immunity. In the short term, there is little evidence that liner alliances engage 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 container shipping market volatility risks arising from 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 regression in globalization. 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 international crude oil price fluctuations, 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 substantially. Finally, IMO and national government environmental regulations and policies may significantly increase shipping companies' fuel costs. Historically, the 2020 global sulfur cap brought enormous changes to the consumption structure of the bonded marine fuel oil market, with low-sulfur fuel oil, MGO, LNG clean energy, and other alternative fuels all greatly increasing marine fuel costs, thereby bringing severe price fluctuations.