Reporter of the Economic Business: Zhang Yun Reporter of the Economic Business Business: Cheng Peng, Wenduo
Generally speaking, the third quarter is the traditional peak season for global marine container transportation, but the sea freight market suffered a cold wave in the third quarter of this year, and the freight rates of major sea routes fell sharply.
Take the US-Western route as an example. The Drury World Container Freight Index (WCI) index report shows that on September 22, the spot price from Shanghai to Los Angeles fell 11% compared with last week to US$3,779/FEU (unit of measurement), and has fallen 70% compared with the same period last year. On September 27, the Freightos Baltic container freight index (FBX) showed that the container freight rate for the Asian to the United States and West was US$2,943/FEU, down 80% from the beginning of the year.
Image source: Web page screenshot
Since 2022, global container transportation demand has weakened due to the continued inflation and geopolitical impact. After the fourth quarter, what trend will the freight rates in the collective transportation market show?
Industry insiders predict that based on the optimistic expectations of market demand recovery, sea freight prices are still expected to rebound this year. In the long run, what level will the freight rate fall to? The reporter of " Daily Economic News " learned that the stock transportation market will return to "normalization" at the latest in the third quarter of 2023, that is, the 2020 level.
However, for large liner companies, at least the current decline in freight rates is not enough to affect revenue this year.
Image source:
CCTV Finance screenshot
collection freight rates return to December 2020 level shipping companies have suspended their flights
On the eve of the National Day Golden Week, domestic freight forwarders (i.e., "freight forwarders") are waiting for foreign trade companies to seize a round of centralized shipment for delivery.
Image source: CCTV Finance screenshot
"The European and American lines are falling the most, followed by Southeast Asian routes and near-air routes, and Indian routes are also falling." On September 27, a freight forwarder of China-Foreign Transportation described the current shipping market in this way.
"Before shipping the goods, we will inquire from several long-term freight forwarding companies. Recently, I feel that I am a little eager to ask for goods, because when I ask, several freight forwardings are chasing me and ask whether to do it." A customs consultant for a foreign trade company told the reporter of "Daily Economic News".
Image source: Shanghai Shipping Exchange screenshot
According to data released by the Shanghai Shipping Exchange on September 23, the latest issue of the Shanghai Export Container Freight Index (SCFI. Reflects spot freight) fell 240.61 points to 2072.04 points, a weekly decline of 10.4%, down 15 consecutive weeks; China Export Container Freight Index (CCFI, reflects the overall market) was 2475.97 points, down 5.1% from the previous period. The reporter noticed that the decline in SCFI in the past three months far exceeded that of CCFI, which shows that long-term freight rates are relatively stable, while spot freight rates fluctuate more severely.
Maersk released the latest issue of Asia-Pacific market insights on September 27, pointing out that due to inflationary pressure and rising energy costs, the economic outlook for Europe and the United States is increasingly pessimistic, and the container shipping market is facing strong headwinds. The latest economic data shows that from May to July, regional container volume showed negative growth, with Asia's total export volume falling by 1.1%, and import volume falling by 8.3%. container freight rates have declined, with SCFI dropping sharply since June to about $3,000 per TEU in September, returning to the same level as in December 2020.
Global shipping giant Dafei also said in its second quarter report released in September that inflationary pressure has slowed consumer spending in recent weeks, and demand for shipping has been weakened, and in some regions, these developments have led to a drop in spot freight rates.
According to CCTV Finance, industry insiders said that due to the outbreak of the supply chain, many countries experienced a "stocking wave" last year, which also led to a sharp increase in shipping costs last year, which is an unsustainable state. This year, due to the increasing pressure on global economic inflation, demand began to decline, and a large number of new ships were launched, which intensified the gap between supply and demand.
Due to the decline in freight rates, many shipping companies have begun to suspend their flights one after another, to change the situation of oversupply.Data released by the shipping consulting agency Drury showed that in the five weeks from September 19 to October 23, 122 flights were cancelled, with a cancellation rate of 16% in the 750 scheduled flights on major routes such as Trans-Pacific, Transatlantic, Asia-Nordic and Asia- Mediterranean . Among them, the three major shipping alliances in the world have successively canceled 101 voyages.
The peak season is not strong: demand in Europe and the United States has declined
China COSCO Shipping (SH601919, stock price 11.05 yuan, market value 177.8 billion yuan) Secretary to the board of directors Xiao Junguang said in a survey by investment institutions on September 20 that on the supply side, port congestion in major navigation areas has been alleviated recently, and capacity has been gradually released; on the demand side, under the influence of factors such as increasing inflation pressure and high energy prices, market demand has declined to a certain extent. The subsequent market may show that the peak season is not prosperous and the off-season is not dull.
"We see that congestion in major European ports continues to improve, and productivity is recovering, but it is expected that ship schedule delays and the possibility of hopping will continue to occur in the next few months." Maersk said that at present, the waiting time of ships in ports such as Rotterdam has been shortened, and the rise in water levels of Rhine has also alleviated the bottleneck of barge transportation and inland capacity. However, the density level of hamburger yards is still very high. At the same time, the ongoing strike wave at British ports will continue to have an impact on ship dispatch.
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In the long run, port congestion is not a key factor in freight rate trends, and the decline in consumer demand is more worthy of attention. Recently, Ma Hui, deputy editor-in-chief of Shipping Network, told reporters on WeChat: "September to October are usually the peak season for the US and European lines, because they are both Christmas goods. We believe that the reason for the poor peak season of this year is that the inventory backlog of US retailers and no large number of new orders has been generated. On the other hand, due to the influence of freight rates, some shippers and shippers are still waiting and watching, wanting to get a lower price."
Yiwu is the world's largest Christmas products distribution center. "Daily Economic News" reporter contacted two local export factories.
Director Hu said that this year's foreign trade Christmas supplies started shipment in April, but the overall order was not as good as last year, and it was reduced by half.
, and another factory director, Mr. Liu, said that the orders can still be arranged now, and some popular products have been produced. In addition to spot stock, they are also recruiting workers to produce thousands or even 10,000 or 20,000 sets of dolls, so they are not worried about orders.
can be seen that demand in Europe and the United States has declined to a certain extent, but the manufacturing end of the domestic and foreign trade industry is just some people who are happy and some are worried. In Yiwu, the sports goods factory preparing for the World Cup is still rushing to make orders and must be delivered to customers before November 21.
One cold and one hot hides optimism about the future. From a global perspective, Maersk believes that for retail customers, the fluctuations in consumer demand caused by the epidemic and the large-scale inventory imbalance caused by store closures will be improved. As consumer behavior recovers after 2022, analysts are optimistic about the future of the retail industry, especially the performance of e-commerce channels - based on Euromonitor International's forecast of the CAGR of the global retail industry from 2021 to 2026 to be 6%.
Xiao Junguang also said in response to investors that demand for is currently at a relatively low point this year and is expected to rise in the future. According to the preliminary survey of the market, customers are currently gradually destocking. As consumers' consumption confidence gradually recovers, it is expected that market demand will increase in the fourth quarter of this year, which will help further improve the overall supply and demand relationship of the market.
The profit level of the liner company has reached its peak?
In the short term, Maersk said: Continue to see a sluggish consumer demand. During the National Day Golden Week, blank sailings will occur in Asia to the Mediterranean, Europe and the Trans-Pacific region, and shift adjustments as of mid-October will affect some of Maersk's services.
Image source:
CCTV Finance screenshot
According to Drury's latest report on flight cancellations, due to weak demand in Europe and the United States affecting Asian exports and most factories in China were suspended during the National Day Golden Week. In the next five weeks from September 26 to October 30, liner companies around the world will cancel 117 flights, accounting for 16%, to offset the decline in freight volume and freight rates.
However, Drury also emphasized that although spot freight rates have dropped for 30 consecutive weeks, long-term freight rates have remained stable so far, and shippers continue to face difficulties in supply chain congestion, especially in Northern Europe and the United States.
Ma Hui further stated that the spot freight rates in the collective transportation market will usher in a stable stage after the National Day Golden Week. After the epidemic, liner companies will have a certain reasonable profit margin. As for whether market demand will rebound, we will see each other after the Golden Week. In fact, for large liner companies, the current decline in freight rates is not enough to affect this year's revenue, and long-term contract customers are still the core customers of the first echelon.
Xiao Junguang also responded to investors on September 20 that the company is confident in the performance of core contract customers, and the two parties have established a long-term cooperative relationship. Although the current market volume has fluctuated due to high inventory and other factors, most customers still adhere to the attitude of abiding by contracts. If new changes occur in the subsequent market, the company will properly handle the contract between the two parties after comprehensively evaluating the customer's previous performance of the contract, but it is believed that there will be no breach of the contract, and the overall impact will be limited.
At present, there are also some bearish voices in the capital market. On September 28, the closing price of China COSCO Shipping (11.05 yuan per share) hit a new low for the stock price this year. In fact, it has become a consensus in the industry that the collective transportation is returning to "normalization", but there are differences between "when will it bottom out" and "what level will it return to".
Previously, the CEOs of Maersk, Dafei, and Hapag-Lloyd predicted that the shipping market would normalize by the end of 2022. Some consulting agencies seem to have concluded later. According to the latest research by Sea Intelligent, the capacity and accurate shift rates of the collective transportation market are currently increasing, and it may return to normalization from April to mid-September 2023, and the most likely time is within July to September 2023.
Image source: CCTV Finance screenshot
The integrated transportation market has appeared on the track of returning to normalization, but the shipping industry believes that for liner companies, the market is still profitable at least for the moment. According to HSBC , liner companies' profits in 2022 will reach record highs. However, the market will return to normal from 2023 to 2024, and corporate profit margins will drop by about 80% from this year's peak. At that time, according to calculations from the shipping industry, the returns of Maersk and Hapag-Lloyd will be normalized to a comparable level in 2020.
This means that the stable long-term freight rates this year will continue to support the liner's annual performance, but as the contract expires and renegotiations, liner income will gradually decline. In order to delay the trend, as of September 27, the three major liner companies of Mediterranean Shipping , Maersk and Dafei have completed their transformation to comprehensive logistics suppliers in sea, land and air. China Transportation Haikong extends transportation services to both ends of the shipping section by promoting the digital construction of shipping. In addition, continuous investment in increasing container equipment and ship capacity is an important measure for large liner companies to seize market share in the past two years. The shipping industry believes that only by having a more stable competitive advantage and increasing the proportion of long-term contracts can the performance be maintained.
reporter | Zhang Yun
editing | Cheng Peng Wenduo Du Hengfeng
proofreading | paragraph refining
cover picture source: CCTV Finance report screenshot
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