After more than two months of sustained high freight rates, the market has finally seen a correction. The latest Shanghai Containerized Freight Index (SCFI) closed at 3184.83 points, down 142.04 points in a single week, a decline of 4.27%, ending ten consecutive weeks of gains. For textile exporters long burdened by high logistics costs, this presents a rare window for cost relief.
Decline across the board, led by the US West Coast
This freight rate decline is not a local fluctuation but a systematic downturn across all core export routes. The US West Coast route saw the steepest drop, with some spot quotes falling nearly $1,000 per container in a week. The US East Coast and European routes also saw corrections of around 10%. Meanwhile, the price gap between shipping lines has widened, and spot capacity has loosened significantly.
During the period of high freight rates, spot prices on US and European routes repeatedly hit record highs. Many textile factories had exhausted their annual logistics budgets by mid-year and had to apply for additional funds to maintain exports in the second half. Now, with spot rates cooling and carriers simultaneously lowering the blended settlement price for long-term contracts paired with spot cargo, large factories with mixed capacity have seen their overall logistics costs drop significantly, easing the financial strain. Small and medium-sized trading firms handling scattered orders also benefit directly from lower per-order shipping costs, slightly widening their profit margins.
Limited relief, profit recovery remains cautious
However, the industry must recognize that the current freight rate base remains high. Compared to the low point in the second quarter, the SCFI is still far off. The pressure of logistics costs has only eased from 'unbearable' to 'still elevated,' not fundamentally eliminated. This means the room for profit recovery for textile exporters is limited, and the overall operating environment remains tight.
During the high-freight period, the textile industry was squeezed from both ends. Upstream shipping and raw material costs kept rising, while downstream overseas buyers continued to push for lower purchase prices. With intense competition from homogeneous products, companies found it difficult to pass on rising logistics costs to overseas clients, absorbing all the cost burdens themselves. Now, with lower shipping costs, companies have more room to adjust pricing: they can moderately lower export quotes to enhance competitiveness and retain existing customers, or retain some of the cost savings to improve their own margins.
Rush to ship fades, supply-demand rebalances
The core driver of this freight rate reversal is the fading of the earlier rush to ship, as market shipping volumes gradually return to normal. Previously, overseas buyers accelerated stockpiling to avoid tariff costs, creating an unusual peak in shipments. Domestic textile factories were forced to rush production, straining the entire supply chain and inflating both production and logistics costs, while also pulling forward future order demand. As the rush for stockpiling cools and new shipping capacity continues to be deployed, the supply-demand balance in the shipping market is restored, and irrational scrambling for space and concentrated shipments are gradually disappearing.
However, the underlying risks are not to be underestimated. This freight rate correction is not a healthy decline driven by recovering overseas demand or ample capacity expansion, but a temporary adjustment after the rush demand subsides. Coupled with the fact that the traditional peak season in the third quarter has started with orders performing below expectations, the incremental growth in overseas orders remains highly uncertain. Textile practitioners should not become overly optimistic due to short-term lower shipping costs. They must remain vigilant against the risk of order contraction caused by weak overseas demand, and prudently manage production capacity and finished goods inventory.