text | Pan Xiaoyu
edit | Peng Xiaoqiu
Everything is cycled, and the shipping is even worse.
Shipping under the epidemic provides many people with an epic opportunity to get rich: a container that was originally worth $1,500, could be sold for $30,000 or $40,000 during the epidemic. The industry even joked: "The cross-border seller who bought Shenzhen Bay No. 1 in 2020 sold the house to the freight forwarder in 2021." The performance of the secondary market of
is even more crazy. For example, the big bull stock , Zhongyuan Sea Control , had a net profit of 89.3 billion in 2021, while it still maintained a 78.6% growth (i.e. 27.6 billion) in Q1 2022; at the same time, the share price of Oceanwide giant Maersk rose 3 times, and Yangming Shipping soared 46 times. Zhonglian Shipping also submitted the prospectus book last year. How to look at is a big year that has been harvested by shipping.
However, when many people in the industry were looking forward to how to spend money, shipping ushered in a cliff-like decline, shattering this dream of getting rich.
Usually Q3 is the traditional peak season for global shipping, but this year's Q3 is particularly bleak. Last year, a container worth $20,000 on the US-Western flight route has fallen back to $3,000; many freight forwarding companies have begun to be exposed to negative news such as storm and running away.
, which reflects the price trend of bulk dry bulk, has an average price of US$3,369 as of October 21, down 70% from the historical high in September last year. Not only that, with the delivery of nearly 2.4 million new ship capacity in in 2023, this huge cyclical curve seems to be still spreading.
If the shipping cycle is drawn as a solid line, then the two big hands that move the lines on both sides are supply and demand. From this perspective, you can understand the cycle of shipping, but although the general direction is good, every cycle reincarnation cannot avoid the black swan event interspersed among them.
The cycle of bankruptcy and wealth is back and forth
If you want to understand the cycle, you have to start tracing the source from container transportation.
In 1957, with a horn sounding, the world's first modified full- container ship, the Gateway City, slowly sailed into the Atlantic , opening a new prelude to the human shipping process.
The new here is mainly reflected in the impact of containers on the global logistics system: In order to adapt to the application of containers, a standardized transportation system suitable for containers has been formed from yards, docks, lifting, ships, cars, and even highways, bridges, tunnels and other units.
Although at the beginning of the birth of containers, executives of shipping companies were not very good at this business, and even believed that it would be less than time to use containers in the next ten years. However, with the International Organization for Standardization (ISO) in 1961, the advantages of container transportation were gradually recognized by people, and international transportation led by maritime transportation entered a stage of rapid development.
ISO container (20 feet, 40 feet, 40 feet) size, picture source China Merchants Futures
In 1965, 6 shipping companies announced that they would start container business to Europe in the second year; in 1969, Dong Haoyun officially established the " Oriental Overseas Container Shipping Company ", converting 7 old ships into container ships, and then bought 7 new ships from Japanese shipyards; in the same year, the United States also built 25 container ships, the largest load of nearly 2,000 TEU; in 1975, the container ship "Changchun Ship" of Evergreen Shipping, Taiwan, sailed from Taiwan to the east coast of the United States. While shipping companies are rapidly turning to container transportation, the global economy of on the other end also began to accelerate in 1972. From 1971 to 1973, the global tonnage of containers nearly doubled.
More than that, the economic prosperity continues to blow out a new bubble: in 1973, crude oil prices soared, and the cost advantage of container transportation was further reflected. In this year alone, the global volume of goods transported by the cargo increased by 40%. As the supply and demand gap widened rapidly, major shipping guilds have raised prices hundreds of times in a row. The skyrocketing freight rates also caused the profits of shipping companies to roll over several times. In 1973, the profits of the sea-land and land transport company were only US$16 million, and the second year rose to US$142 million.
maritime transportation seems to usher in a prosperous and vigorous era, but the crisis is quietly brewing in it. In order not to be squeezed out of the market, once a shipping company introduces containers on a specific route, other competitors will often quickly follow up with . Therefore, capacity has grown rapidly and is unaware of. From 1968 to 1974, capacity increased 14 times on those international routes with the largest cargo volume.
The bursting of the bubble is at this moment. The freight rates caused by oil were eventually dragged into the valley by the oil crisis. As central banks of various countries tightened their monetary policies in 1974 to offset the inflation results of rising oil prices, the world economy fell into recession, and in 1975, maritime trade volume decreased by 6%. Shipping volume has dropped sharply, and the inertia of capacity growth has not yet been braked. With the inversion of supply and demand, major shipping guilds have been forced to cut prices more than 600 times, and freight rates have reached the bottom of the cycle.
After that, as the world economy recovered, the sluggish shipping also began to recover. After a brief breath, the shipping companies entered a new round of arms race again, and sea transportation ushered in a blissful period.
Until 1985, this time it was still oil. oil prices did not increase from $28 per barrel to $50 as shipping giants predicted, but plummeted to $14 in half. Global shipping has ushered in its biggest collapse.
In 1986, the American ship company founded by McLean, the "father of containers", declared bankruptcy, which is also the most chaotic bankruptcy case in American history. As collateral assets, 52 cargo ships of the US Shipping Company were detained in the hands of multiple ports around the world and were later sold at a low price to the intermodal and land transport company.
The cycle of shipping is ups and downs until today, from the 1980s to the present, every ups and downs of shipping are accompanied by obvious economic fluctuations. For example, taking the 2008 financial crisis that swept the world as an example, the collective transportation industry ushered in a turning point in slowing growth. has since fluctuated freight rates and shortened cycles, and overcapacity has also become the biggest theme of shipping since 2008.
What to save you, my cycle?
Since the birth of containers, the shipping cycle has been repeatedly staged in the ocean with cruel Darwin's laws. From the American shipbuilding company going bankrupt in an instant during the cycle, to the ship king Dong Haoyun's Oriental Overseas was insolvent in the shipping crash and was on the verge of bankruptcy. No one can escape the "curse" of the cycle, and shipping companies can only try their best to find ways to resist risks before the next cycle arrives. When
is at the bottom of the cycle, freight rates often fall again and again, so that shipping companies can only barely earn back the operating cost of . So when the freight rate collapses, only the operator with the lowest cost has the chance to survive. Therefore, in order to reduce the cost of each container, shipping companies have started round after round of arms races, and they are constantly building larger ships and heavier cranes.
In 1982, Evergreen Shipping spent 1 billion US dollars to order 16 container ships. After redesigning, each of these ships can carry 2728 20-foot containers. Evergreen Group founder Zhang Rongfa named them the "G-class" container ships; the US Shipping Company followed suit and ordered 14 "economy" ships, each of which can carry 4482 20-foot containers.
According to the data of "Amazing Made in China", the transportation cost of an 8000TEU container ship is 10% to 15% lower than that of two 4000TEU container ships. Therefore, even large container ships that are considered high-tech, high-difficulty and high value-added have been developing in the direction of "building bigger and bigger". Today, this data has reached 21,000 TEU from 3,000 TEU in the 1970s.
The trend of large-scale container ships, the source of the picture China Merchants Futures
As the large ships entered the ocean, the channel also began to widen. The most typical of them are the Panama Canal and Suez Canal . After the widening in June 2016, the Panama Canal was officially launched, and the ship limit through the canal was increased from 5294TEU to 13208TEU, which means that the proportion of all-water routes from Far East to the east coast of the United States increased by more than 10% in a short period of time.At the same time, the Suez Canal also launched a new canal widening project in 2015. After the renovation, the time for the Red Sea to connect to the Mediterranean will be shortened from 22 hours to 11 hours, and ships above 21,000 TEU are allowed to pass.
In fact, since the late 1970s, has become the "holy grail" of the shipping industry. not only has the size of the ship being larger and larger, but the number of ship companies buying ships is also growing rapidly.
As a product of shipping companies to gain market share, the cabin space has become a necessary means for various companies to compete for the right to speak for pricing. In order to gain enough market share, shipbuilding competitions have started in full swing.
, led by Maersk, ordered 20 18,000 TEU large ships from South Korea in 2011, reaching the top of the world's largest cargo capacity. In the same year, it proposed the goal of "Tiantian Maersk" to take the lead in the inversion. In 2012, Maersk quickly occupied 16% of the market share; while the second and third-ranked Mediterranean and Dafei were not to be outdone, and rented 11 new ships close to 19,200 TEU in the Mediterranean; Dafei upgraded 8 new ships of 16,000 TEU to 17,700 TEU. Subsequently, Dongfang Overseas, Evergreen Shipping and China COSCO Shipping’s predecessor, , China Overseas Consolidated Shipping, , all joined the shipbuilding competition.
Interestingly, whether it is a large ship or a competition for transportation capacity, it is a moat built by shipping companies to cross the cycle, but the surge in transportation capacity will intensify the fluctuation range of the cycle when the next cycle comes.
So, as early as the beginning of the development of the collective transportation industry, shipping companies realized that - when high freight rates collapse, only the establishment of a new price system is the only way out. As a result, an organization that gathers shipping companies to resist risks begins to form - alliances.
From the early Transatlantic Shipping Guild, to the North Atlantic Freight Joint Venture Agreement organization established in 1971, to the P3 Alliance, which was still born in 2014. The shipping alliance gathered, disintegrated and reunited like seaweed floating on the sea, and finally formed the three major shipping alliances today: the "2M Alliance" composed of Maersk and the Mediterranean, the "Ocean Alliance" composed of Dafei, COSCO Shipping, Evergreen , and the THE Alliance formed by Yangming Shipping, ONE Shipping, etc.
After experiencing this protracted wave of sand, the three major shipping alliances now control 90% of global capacity. Therefore, when the next cycle begins, the alliance is equivalent to an "invisible hand", trying to regulate market freight rates through the cycle through advance layout.
three major shipping alliances, the picture source network
has a tall building, the building collapsed
, but the sudden outbreak of the epidemic completely broke this balance with its uncontrollable trend.
At the beginning of the epidemic in 2020, with the nearly stagnant consumption demand in various countries, the three major shipping alliances announced large-scale suspension of flights. By May of that year, nearly 12% of the global capacity was idle.
However, the recovery of transportation capacity did not catch up with the speed of resumption of work and production in China, and a large number of global orders and production capacity were pouring into China. At the same time, piles of containers are stuck in European and American terminals. In addition, the terminal is inefficient in unloading and slow container rotation, so the freight is directly on the rocket. Regarding the reasons for the surge in sea freight since last year, we have disassembled it many times. A brief summary can be understood as: the supply and demand are seriously mismatched, and the addition of black swan events such as the Suez Canal and the Yantian Port epidemic, which eventually caused a container to rise by more than 10 times.
Eat meat upstream and drink soup downstream. The fanatical phenomenon of freight forwarding making lying on the slump under the surge in sea transportation has become a widely circulated myth in the industry. Last year, many freight forwarding practitioners told 36Kr : "Abnormality is the norm."
In fact, most people still have a relatively optimistic attitude towards freight rates. After all, the alliance that monopolizes 90% of the capacity has the greatest voice in the shipping market, and freight forwarding has signed a long-term contract to stabilize freight rates.
The ups and downs of the shipping cycle are always unexpected. In the second half of this year, freight rates fell rapidly, and many cross-border sellers said that freight rates have even fallen back to their pre-epidemic levels. Take a container on the US-Western route as an example. It could reach the average price of 20,000 US dollars at its peak last year, but now it has fallen to 3,000 US dollars, a drop of more than 80%.The tide of suspension of
is also emerging. According to data from the shipping consulting agency Drury, from September 19 to October 23, 122 of the total of 750 scheduled flights on major routes such as the Trans-Pacific, Transatlantic, Asia-Nordic and Asia-Mediterranean were cancelled, with a cancellation rate of 16%.
Shipping company canceled 16% of its voyages, but the failure of sea transportation can be traced. On the one hand, as the shortage of overseas employment has eased, the turnover efficiency of the wharf has begun to improve, and port congestion has been significantly alleviated compared with last year.
On the other hand, the supply and demand correction is the hot online consumption since the epidemic, which has overdrawn overseas consumption capacity to a certain extent. In addition, due to inflation, the outlook for overseas consumption is still sluggish. According to the import and export data of Los Angeles Port in September, as the largest container throughput port in the United States, the total import volume of Los Angeles Port fell 26.6% year-on-year, which is also the lowest level since May 2020. What is even more terrifying is that the shipbuilding competition of ship companies continues. Among them, taking advantage of the surge in sea freight, Mediterranean surpassed Maersk to take the first place in the world in container shipping by purchasing a large number of second-hand ships; and Maersk also announced the additional orders for 6 new energy ships against the trend on October 5. According to Alphaliner data, nearly 2.4 million TEU of new ship capacity will be delivered in 2023, and by 2024, 2.8 million TEU will be put into the ocean, and the current ship order volume of 7 million TEU is far exceeding the 6.6 million TEU record in 2008. Under several factors, the result is that freight prices fall sharply, contract prices are inverted with market prices, freight forwarders run away, and freight forwarders are starting to appear frequently in the market. However, for shipping companies, the ups and downs have long been commonplace, not to mention that they made dozens of times the profits in the past year. Even if they deposited their revenue in the bank, the interest generated every year can withstand a fluctuation.
But in the face of the cycle, shipping companies are still awe and diligent, and are actively building new moats. Take Maersk as an example and not only begins to deploy new energy ships, but also extends to both ends of the value chain such as land transportation, air transportation, logistics services, etc. The six new energy ships it ordered are driven by methanol dual fuel, which is expected to reduce emissions of 800,000 tons per year. Maersk CEO Shi Suoren also said in an interview: "Maersk will not make a hard landing, and the onshore transportation business will become Maersk's savior."
In addition, new integration has also begun to appear. With the large-scale container ships and the increase in the concentration of market , homogeneity within the alliance is also intensifying. Therefore, shipping company began to turn its attention to the upstream and downstream integration of in the industrial chain, such as Maersk integrating Maersk Shipping, Maersk Terminal, and Danmas Logistics; Dafei acquired Jihua Logistics; COSCO Shipping also integrated container and terminal businesses, etc.
Since it is called a cycle, shipping always has a day to bottom out and rebound, but before this curve rises, no one can say that new moves or old routines can successfully cross the cycle and laugh to the end.
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