Gone are the era of shipping companies "making money while lying down".
htmlOn September 27, the Freights Baltic container freight index (FBX) showed that the global container freight rate was US$4,085/FEU, which has fallen by 63% compared with the highest point last year. Among them, the freight rate of China/ Far East -North America West Coast route fell by 85.7% from last year's highest freight rate level. The World Container Freight Index (WCI) in Deluri has declined for 29 consecutive weeks.The quote obtained by Jiupai Finance from a freight forwarding company shows that as of September 29, the 20-foot container freight rate from Shenzhen Shekou to the United States and West had dropped to US$2,650, which also evaporated by nearly 88% compared with the high of US$23,600 in March this year. "Last year it was almost a box that was hard to get, and even if you had money, it was difficult to find all the cargo full of a ship." An employee of the freight forwarding company told Jiupai Finance that now when the price list is opened, the prices are all lowered.
The shipping price in Asia also dives straight. "For example, if you go to Ho Chi Minh City, Vietnam, the shipping fee can even be free." A staff member of a shipping company in Guangdong told Jiupai Finance. Guo Shaohai, former vice president of Dafeisteel (China), even said bluntly that after deducting the low-sulfur fuel surcharge, the actual freight rates from China to Southeast Asia, Vietnam, , Thailand and other places are negative.
Affected by the overall market downturn, the stock prices of major domestic container shipping companies also fell sharply. On September 29, China COSCO Shipping (601919.SH) closed at 11.08 yuan per share, down 40% from the year's high; Oriental Overseas International (00316.HK) closed at 135.2 Hong Kong dollars per share, down more than 50% from the year's high.
was the peak season for the foreign trade industry's "Golden September and Silver October", but why did the shipping market reveal a wave of "chilling"?
demand cooled down, supply soared
external environment oscillations are directly reflected in the shipping prices.
Previously, due to the outbreak of the supply chain, there was a "stocking wave" in many countries, which also led to a sharp increase in shipping costs last year. This year, overseas consumption demand has begun to decline, and terminal merchants urgently need to destock.
data shows that since October 2021, retail goods inventory in the United States has been rising. Among them, the inventory turnover rate of Macy's in increased by 9% year-on-year, and inventory increased by 17% year-on-year; the inventory of Debao in May this year increased by 31.91% year-on-year; the inventory level of Walmart also increased by 33% compared with the same period in 2021.
Major retailers in the United States have expressed that they will cancel or reduce orders in the future and focus on "destocking". In August, Walmart said it canceled billions of dollars in orders; retailer Target said it canceled orders of more than $1.5 billion.
is extended to shipping companies, which is reflected in the continued weakness of external orders and weakening of space demand. A recent questionnaire survey conducted by the China Council for the Promotion of International Trade on more than 500 companies showed that 62.5% of companies said that orders were unstable, with short orders and small orders and large orders. Some companies look forward to resuming domestic exhibitions and liberalizing overseas exhibitions to obtain more orders.
"The market is polarized, and the same is true for the company. It is very busy and very idle." Freight forwarder Jason told Jiupai Finance that the most painful thing is the newcomers who came in last year and had no customer accumulation. It is not that the performance has dropped from 100,000 to 50,000, but it is directly 0. In this case, the freight rate will naturally "reduce the fever".
In addition, the plummeting price of sea freight is also related to the surge in supply.
Since the epidemic, many old shipping companies have successively added new ships, bringing about capacity improvements. COSCO Shipping has placed four ship orders, and has held new orders to reach 34 container ships, and 590,000 TEUs; Mediterranean Shipping has placed orders this year to build 42 LNG dual-fuel power container ships worth more than US$6 billion... Professional agency Clarkson predicts that the capacity of the container fleet this year will increase by 3.7% year-on-year and will increase by another 8.1% in 2023. The freight forwarding market also achieved the fastest growth in ten years, reaching 11.2% in 2021, and a large number of practitioners were pouring into the industry. The staff of the above-mentioned shipping company said that recently many freight forwarders have begun to "grab goods" (a sales method, that is, to pick up goods at low prices), and a few "zero freight rates" and "negative freight rates" have also emerged.
supply side is difficult to brake, but demand is cooling down. The current shipping business has changed from seller market to buyer market .
huge profits no longer last
Many practitioners believe that even though the shipping price has plummeted for dozens of consecutive weeks, the current price is still in a reasonable range, which is a rational return after the surge.
Take the price of the US-Western route as an example. The current quote is still 2-3 times higher than the US$1,395 in August 2019. A practitioner told Jiupai Finance, "We can't just look at the surface. The stock price of COSCO Shipping has risen from more than one piece to more than twenty. It took only a year to make a fortune in silence."
Since the epidemic, the shipping business has become a "profitable" industry in the eyes of outsiders.
Global shipping giant Maersk Group financial report disclosed that the company's annual revenue in 2021 was US$62 billion, a year-on-year increase of 55%, and its annual profit before interest, tax, depreciation and amortization (EBITDA) tripled, reaching a record $24 billion.
Other major global shipping companies have also experienced a surge in performance. Hapag-Lloyd 's profit before interest, tax, depreciation and amortization in 2021 was US$12.8 billion, a year-on-year increase of 316.1%; while Dafei Group's net profit in 2021 increased by more than 900% year-on-year.
But this does not mean that shipping companies can enjoy the benefits.
Last year, the shipping price was at a high level. In order to control logistics costs, many export companies chose to sign long-term agreements with shipping companies to obtain freight rates lower than the market at that time. However, with the current plummeting of shipping prices, the prices of long-term contracts and spot prices have already shown serious inversions. There has been a wave of breaking contracts in the market, and demanding that long-term contracts be re-designed with shipping companies.
In response to this, Zhang Shaofeng, director of Yangming Shipping, said that in May, he was too optimistic about the stability of freight rates, and the market decline exceeded expectations. The transportation company is indeed facing the pressure of the shipper asking the shipper to renegotiate the contract freight rates.
In addition, the above-mentioned unnecessary transportation capacity has also become a problem. As of August, there were 927 unfinished container ships worldwide, with a total of 7.034 million TEUs, accounting for 27% of the current total capacity, 1.4 times the total capacity of the top ten liner companies in the world. These new ships will be launched in concentrated water from 2023 to 2025.
The situation of too many ships and too few cargo will undoubtedly further increase the cost of shipping company operation and maintenance.
In response to this, the management of Meisen Shipping Company recently stated that in the past two months, the market has been under greater downward pressure and has become less orderly. Recently, Messen Steeler has announced that it will withdraw its third service route from China to the West Coast of North America, CCX, which was just built last year.
Drewry data shows that from September 19 to October 23, 122 voyages have been cancelled in the total of 750 scheduled voyages on major routes such as the Trans-Pacific, Transatlantic, Asia-Nordic and Asia-Mediterranean, with a record cancellation rate.
Some practitioners believe that the subsequent decline in freight prices is expected to slow down, and even if the shipping price rebounds, it is only a temporary period. From a medium- and long-term perspective, the weak cycle of freight rates has become a foregone conclusion.
Jiupai Finance Guo Zihao
[Source: Jiupai Finance]
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