The good days of in the container shipping market may be over. As spot freight rates fall below long-term contract prices, more and more shippers are beginning to renegotiate prices with shipping companies. Once they lose the "protective umbrella" of sky-high long-term contracts, container shipping companies may find it difficult to achieve new highs in performance this year.
Recently, it has been reported that some cargo owners plan to renegotiate long-term contracts with shipping companies. According to industry insiders, shipping companies that did not sign long-term contracts with cargo owners have begun to extend olive branches, and their quotations are thousands of dollars less than the previous contract. Therefore, shipping companies that have signed long-term contracts have no choice but to return to the negotiation table and re-engage with major customers. Negotiate a long-term contract price; someone else revealed that his friend originally signed a long-term contract price of US$9,500, but now uses the spot price of US$7,000-7,200 to fulfill the contract.
html The latest Shanghai Export Container Freight Index (SCFI) on June 24 showed that the freight rate per FEU on the US East Line has fallen below US$10,000, a new low in the past year. It is reported that the price per FEU of some container freight rates on the US West Line It is already less than 7,000 US dollars, and the spot price has fallen below the long-term contract price, showing an inversion phenomenon. The spot price of the European line is also in danger of sticking to 10,000 US dollars. The data shows that the pressure for freight rate revisions has not stopped.Industry insiders said that high freight prices have forced the retail industry to increase prices significantly, resulting in a sharp drop in demand, falling sales, and a surge in inventory. In the context of the easing of the port congestion problem, retailers have stocked up, and have reduced prices to clear inventory. , and also slashed orders from Asia. At present, the problem of Vietnam export space to the United States has been greatly improved. The shipping companies that did not sign long-term contracts originally quoted thousands of dollars less than the previously signed freight rates, so the shipping companies that had signed long-term contracts had to re-draw long-term contract prices with major customers. A customer survey conducted by
Xeneta shows that 71% of the companies surveyed believe that if the market changes significantly, they will seek to renegotiate long-term contracts; while 11% of the companies surveyed said they are prepared to default and look for a more cost-effective deal; and only 8 % of the companies surveyed said they would continue to fulfill existing contracts no matter how the market changes.
Although the market generally predicts that spot freight rates will decline year by year in the second half of the year, the current spot freight rates on trans-Pacific routes are still much higher than pre-epidemic levels. Drewry's data shows that the freight rate from Shanghai to Los Angeles is still 5.7 times higher than the same period in 2019, and the freight rate from Shanghai to New York is still 4.3 times higher. In the first half of this year, both spot freight rates and long-term contract prices increased significantly compared with last year. Therefore, even if spot freight rates fall in the second half of the year, they will be offset by higher long-term contract prices.
Affected by this, container shipping giants all expect that their performance in 2022 will be better than that in 2021. In May this year, Drewry raised its forecast for the total annual profits of container shipping companies, further increasing from the estimated US$200 billion in late January to US$300 billion, an increase of 40.19% from last year.
Despite this, against the background of continuous decline in spot freight prices, the industry has also begun to question whether the performance of container shipping companies can achieve greater success this year. Analysis by FreightWaves, an American logistics media platform, pointed out that there are at least four imminent risks if container shipping companies want to reach new highs in performance. One of them is that freight volume may drop more than expected, and spot freight rates may correct to normal levels very quickly. quick.
Vespucci Maritime, a shipping consultancy, said that unless the market tightens quickly in the next week or two, it expects to start seeing shippers renegotiate or shift volumes to the spot market instead of rushing to sign long-term contracts as in the past. If business conditions are much worse than expected, 2022 may not be the best year on record.
