21st Century Business Herald reporter Hu Huiyin Guangzhou report
Recently, sea freight prices are falling rapidly, which also seems to indicate the end of the "early profit-making era" of sea freight.
On September 27, the Freights Baltic container freight index (FBX) showed that the global container freight rate was US$4,085/FEU. In addition, the freight indexes of many domestic export containers have fallen. As of September 23, the China export container freight index (SCFI) was 2475.97 points, down 5.1% from the previous period, and routes including Europe, the United States and the United States and the West are all in a downward trend.
July to September in previous years were the traditional peak season for domestic cargo exports, but at this node this year, shipping costs have fallen one after another, showing a "peak season is not prosperous", which inevitably makes the outside world confused.
Chen Zhen, a researcher at the sea freight futures at Founder Medium Futures Research Institute, told the 21st Century Business Herald reporter that looking at the SCFI comprehensive freight index from 2010 to 2022, freight prices fell in late September of that year compared with early January, and in eight years, the third quarter of the third quarter of the year showed a "peak season was not strong". However, like this year, it was rare that the market fell for 17 consecutive weeks since the beginning of the year and fell for 15 consecutive weeks since the middle of the year. It was indeed rare. "The last time such a bear market occurred was in 2015, and the cumulative decline in the first three quarters of that year was only 43.2%," he added.
The sea freight price that has fallen for several days has even hit a new high. A staff member of , a Tianjin freight forwarding company, revealed that the price of shipping on the west coast of is about 10,000 yuan at the beginning of the year, but now it only costs about 3,000 yuan, a drop of more than 60%.
Although many shipping companies have completed the goal of ordering ships to expand their capacity, these shipping companies have to make adjustments when shipping prices fall. 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 Ocean, Asia-Nordic Europe and Asia- Mediterranean .
Dongsheng Futures shipping analyst Lan Xi told the 21st Century Business Herald reporter that expectations caused the freight rate to fall before reality. Under the influence of emotions, freight rates are oversold. Starting from October, liner companies will take measures to suspend flights and maintain prices to alleviate the downward trend of freight rates.
What are the reasons behind the decline in sea freight prices from high places? When a shipping company expands its capacity and encounters a downward cycle of Shanghai shipping prices, what will the profits be affected?
(Pictures are from Shanghai Shipping Exchange)
From "it is hard to get a box" to "it is hard to get a piece of goods"
In fact, from the end of 2021, sea freight prices have shown signs of "cooling". And this year, the trend of sea freight prices has suddenly become rapidly and rapidly.
On September 27, the Freightos Baltic Container Freight Index (FBX) showed that the global container freight rate was US$4,085/FEU. You should know that on September 13 last year, the global container freight rate soared to US$11,134.44/FEU, and the current freight rate is only equivalent to the freight rate level in January last year. According to this estimate, global container freight rates have fallen by 63% at a high level so far.
talks about the current decline in shipping freight, Zhang Yongfeng, chief consultant of Shanghai International Shipping Research Center, said in an interview with a reporter from 21st Century Business Herald that although international container shipping spot freight has fallen more than last year's high, it is still higher than the pre-epidemic level. "From the industry cycle, the pre-epidemic shipping market has been in the stage of bottoming out and rebounding, and was greatly affected by the epidemic in the past two years. The current decline in freight is also a normal fluctuation, and is a relatively rational pullback."
Although many experts interviewed believe that this wave of market is a normal return after the price surge in the previous period, it is still quite rare for "the peak season is not prosperous" and the sharp drop in freight costs.
Zhang Yongfeng said: "In the past, most of them were the traditional peak season for container exports, and export demand was relatively high, but this year's 'peak season was not prosperous' mainly because the performance of external demand was not very ideal."
He further stated that this phenomenon is mainly caused by the following factors: "First, Europe and the United States continue to replenish inventory, and commodity inventory is high. For example, the three major inventory indicators in the United States are all at a high level; secondly, under the background of the Federal Reserve's continued hike rate hike, the epidemic subsidies were cancelled, global liquidity tightened, and major economies around the world were deeply affected by rising raw material and energy prices and high inflation, and consumer demand was greatly impacted; at the same time, the recovery of production capacity in overseas regions has also reduced the proportion of imported goods from China to a certain extent; in addition, the overall congestion at overseas ports has eased, the turnover rate of ships and the quasi-ship rate has increased rapidly, while the ship loading rate has declined, which has led to a pullback in shipping prices. "
. In Chen Zhen's view, the mismatch between capacity and demand and supply chain tension have been alleviated. Factors such as inflation in foreign countries will continue to affect the global shipping market. He said that it is normal even if the prices of the shipping market further fall in the future, because although the current overall freight rate has fallen below the same level in 2021, it is still far higher than the same level before 2020.
According to the data, in 2019, before the outbreak of the epidemic, the global Boro The average freight index of sea containers (FBX) is about US$1,400/FEU. It can be seen that although the current shipping price has fallen, it is still much higher than the price at that time.
Although the shipping freight price has returned to rationality, insufficient foreign demand has become a new problem that many freight forwarding companies are worried about. The person in charge of a freight forwarding company in Guangzhou told a reporter from 21st Century Business Herald that what we are most worried about is the continued weak external order volume. "The foreign demand problem will not be solved, and the uncertainty of foreign trade will increase, and the entire collective transportation market will be affected. "
medium- and long-term shipping market will be at a low point
In 2021, due to factors such as supply chain disruption and surge in demand, international freight rates soared sharply. Because of this, many shipping companies unexpectedly ushered in a "highlight moment".
Review of the performance of many shipping giants in the past year, it can be said that they have made a "full of money". The 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%. The profit before interest, tax, depreciation and amortization of (EBITDA) has tripled, reaching a record US$24 billion, setting a Danish companies have achieved the highest profit level in history.
is a coincidence. Other major global shipping companies, such as Mediterranean Shipping , Dafei Ship and Hapag-Lloyd , 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.
According to estimates by Drewry, the shipping industry's total profit in 2019 was only about US$7 billion, and expanded to US$26 billion in 2020, 20 In 21 years, it soared to US$210 billion, which is expected to rise to US$270 billion in 2022.
Relying on record performance, shipping companies have been able to make a big move. Taking China Shipping enterprise COSCO Shipping Group as an example, it is reported that after the epidemic, COSCO Shipping has placed orders for shipbuilding four times, holding new orders to 34 container ships and 590,000 TEUs, the capacity expansion scale is second only to Mediterranean Shipping and Dafa Shipping. Among the shipping companies that expand their capacity, Mediterranean Shipping has the largest ship order. From the beginning of this year to the present, Mediterranean Shipping has this year A total of 42 LNG dual-fuel power container ships have been ordered, worth more than US$6 billion.
Currently, new ships ordered by shipping companies have been launched one after another, and the capacity of shipping companies will be greatly improved. Shipping brokerage Clarkson expects the capacity of container fleet this year to increase by 3.7% year-on-year this year and will increase by 8.1% in 2023.
In this regard, Chen Zhen said that many liner companies' new ship orders were determined in the past year to 1.5 years. Considering the 1.5-2-year shipbuilding cycle and order backlog, after the new ship is launched, it is very likely that it has entered a bear market, so the decision to simply expand capacity on a large scale at high prices is actually debatable.
Zhang Yongfeng also believes that in the past two years, liner companies have increased their capacity, and a large number of new shipbuilding orders will be delivered in a concentrated manner next year and the following year will inevitably have a certain impact on the spot market. "Especially for some shipbuilding owners who lack a stable route network, customer base and ship management capabilities, they may face greater cost pressure."
finally waited until the new ship was launched, but in the face of the decline in sea freight prices, some liner companies had to take measures to suspend their flights in order to maintain prices. In this case, will the profitability of the shipping company be affected? Zhang Yongfeng believes that due to the high proportion of long-term contracts of liner companies at the end of last year and the early this year, and the agreement prices are relatively stable, the profitability of shipping companies will be relatively stable.
, however, the current price of the long-term contract has been seriously inverted with the spot price. As of September 23, the China Export Container Freight Index (CCFI), which reflects the overall transportation market (including spot agreements and long-term agreements), was 2475.97, down 5.1% from last week, indicating that the co-price and spot prices are inverted. Therefore, some shipping customers in the market have used this as a reason to tear up the long-term contract and demanded to re-develop a long-term agreement with shipping companies.
"As of August, there were 927 unfinished container ships worldwide, totaling 7.034 million TEU, 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 areas from 2023 to 2025. Moreover, although new shipping environmental policies will be implemented starting next year, some ships will be eliminated or speed limits are restricted, it is expected that more countries will relax epidemic control measures, and ship turnover efficiency will further rebound. Therefore, the original mismatch between supply and demand of capacity will be greatly alleviated, and the market can no longer support the previous high freight rates." Chen Zhen told reporters that the shipping market will be at a low point for a long time, and performance will also be difficult to improve significantly.
Lanxi believes that the subsequent freight rate decline is expected to slow down, but whether there will be a rebound depends on whether marginal supply and demand can be significantly improved and whether market sentiment will be repaired. She told reporters that even if sea freight prices will rebound, it will be only a phased situation. From a medium- and long-term perspective, the weak cycle of freight prices has become a foregone conclusion.
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