Container Shipping Prices Have Risen For Three Consecutive Years And The Trend Of Ocean Routes Has Gradually Differentiated
After falling for more than three months, container shipping prices finally began to recover at the end of October.
On November 8, the Shanghai export container Composite Freight Index (SCFI) released by the Shanghai Shipping Exchange was 2331.58 points, up 1.2% from the previous period, which is the third consecutive week of increase in the index, up about 13% from the trough on October 18.
According to industry analysts, this wave of freight price increases is mainly due to the large-scale suspension of European and American routes, as well as the shipment tide of foreign trade orders before Christmas, leading to changes in the short-term supply and demand relationship in the market. "However, due to weak market demand in Europe and the United States, it is expected that the overall freight rate rise in the later stage is difficult to continue, and the trend of ocean routes such as Europe, the United States East and the United States West will gradually diverge." One market participant predicted.
The widespread suspension caused freight rates to rise
The "China Export Container Transportation Market Weekly Report" (hereinafter referred to as the "Report") released by the Shanghai HNA Exchange on November 9 shows that in dollar terms, China's exports in October increased by 12.7% year-on-year, rising to a 27-month high. In the face of an increasingly complex international trade environment, China's exports continue to grow steadily, creating conditions for China's export consolidation market to maintain a stable and positive situation.
In terms of European routes, transport demand remains high, pushing spot market rates to continue to rise. On November 8, Shanghai Port exports to the European basic port, the Mediterranean basic port market freight (sea and sea surcharges) were 2,541 US dollars /TEU (length of 20-foot container, also known as TEU) and 3,055 US dollars /TEU, up 4.1% and 5.1% from the previous period.
The report pointed out that from the perspective of North American routes, the dust of the US election has settled, and the future needs to focus on the impact of US trade policy changes on the North American route transportation market. On November 8, the freight rate of Shanghai port exports to the West and East basic port markets of the United States was 4729 US dollars /FEU (the length of a 40-foot container) and 5281 US dollars /FEU, respectively, down 2.0% and up 0.4% from the previous period.
At the market level, at the end of October, flights in North America, South America, Europe, Southeast Asia and other routes all experienced warehouse explosions, and some routes' cabin explosions spread to November.
Zhong Zhechao, founder and CEO of One Shipping, told China Business News that the rise in October was mainly caused by the widespread suspension of European and American routes.
For the suspension of the shipping company, Zhong Zhechao explained that on the one hand, the freight has been falling for more than three months, the shipping company has the power of suspension, and is affected by some factors such as port congestion and strikes in Europe and the United States, and the shipping schedule of some routes is unstable, and the shipping company hopes to re-organize the shipping schedule through suspension. On the other hand, December is the European line long-term contract freight negotiation time, if the spot freight continues to fall, the shipping company will be passive in the negotiation, the shipping company based on the lack of cargo volume, low freight and re-combing the shipping schedule and other multiple factors to consider the launch of a large area of suspension, the short-term market effect is obvious, stabilized the decline in freight rates continued to fall.
In the five weeks from September 30 to November 3, 2024, 100 flight cancellations have been announced on the main east-west routes - trans-Pacific, Trans-Atlantic, and Asia-Nordic and Mediterranean routes, representing a total of 14 percent of the planned 693 flights, according to Delury's cancellation tracking data released on September 29.
"Multiple factors superimposed, the proportion of suspension increased, individual routes such as South China to Europe, the proportion of suspension was once close to 40%." This led to a short period of time in mid-to-late October began to appear serious warehouse explosion and dumping." Zhong Zhechao introduced.
Subsequent sluggish growth
"Shipping companies want to continue to push up, but for now, market demand cannot support the continued rise in freight rates, and the market is expected to be stable in the short term." Mr Zhong said another wave of shipments was expected before the Chinese New Year in 2025. There are many uncertain factors in the future foreign trade and shipping market, such as the tariff policy after Trump came to power and the handling measures of the Red Sea crisis, which will affect the price of container shipping in the later period.
Xu Kai, chief information officer of Shanghai International Shipping Research Center, told reporters that the main reason for this wave of freight price increases is the short-term supply and demand changes in the market. Before Christmas, it is the traditional import season in Europe and the United States, and overseas buyers increase their purchases. "From the perspective of the booking situation in the next month, the European freight rate is more supportive than the United States, and it is expected that the European freight rate will continue to rise in the short term, and the United States may show a relatively flat or slow rise." Xu Kai believes that with the end of the Christmas stocking period, the future freight rate will eventually fall, but it is expected that there will be no stampede decline, but it will be stable.
An international freight company in Shanghai also told reporters that from the receiving situation, the current market demand has not increased significantly, far less than the hot market after the Red Sea crisis broke out in the same period last year.
In the "Global shipping Market Dynamics (early November to mid-November)" released on November 7, Kuexun Logistics analyzed the freight rate trend of China, the United States and Central Europe routes, saying that based on the current market situation, the Southwest route of the United States still has a downward trend in the maintenance of stability, the northwest of the United States has a rapid decline, but the overall loading rate of the shipping company is still high, and the East United States is affected by empty shifts, and the maintenance shows an upward trend.
For the China-Europe route, although the shipping company has a price measure, and some have announced the next half of the month to push up the plan, but the market acceptance remains to be seen, affected by the suspension in early November, the space is slightly tight, but the overall supply can still be.
Freight rates remain at historically high levels
Xu Kai reminded that from the historical freight point of view, in addition to the global supply chain chaos caused by the epidemic in 2021 and the surge in freight prices, the current freight is at a historical high of nearly a decade, the overall market oversupply, and whether the future freight prices will fall sharply mainly depends on the trend of geopolitical conflicts such as the Red Sea crisis and the international situation.
The Drury World Container Index (WCI) shows that the WCI rose 7% to $3,444 /FEU as of November 7, down 67% from the epidemic peak of $10,377 /FEU in September 2021 and 142% higher than the 2019 pre-pandemic average of $1,420 /FEU.
Thanks to the support of historically high freight rates, the world's major container shipping giants have significantly increased their performance in 2024.
Cosco Shipping Holdings Co., LTD. (hereinafter referred to as "COSCO Offshore") reported in the third quarter of 2024: The company achieved an operating income of 174.737 billion yuan in the first three quarters, an increase of 29.80%; Net profit attributable to shareholders of listed companies was 38.124 billion yuan, up 72.73% year-on-year. Among them, the operating income in the third quarter was 73.513 billion yuan, an increase of 72.00%; Net profit attributable to shareholders of listed companies was 21.254 billion yuan, an increase of 285.70%. Cosco Offshore said that the performance growth was mainly due to the significant increase in the efficiency of container shipping business.
Shipping giant Maersk has raised its outlook four times this year. At the end of October, Maersk raised its full-year financial guidance for 2024, expecting full-year global container market growth of about 6% (previously 4%-6%), and full-year underlying EBIT of $5.2 billion to $5.7 billion, compared with a previous forecast of $3 billion to $5 billion. Maersk raised its profit forecast for 2024 in May, June and August due to the larger-than-expected impact of the Red Sea conflict on the global supply chain.
Financial data show that in the third quarter of 2024, Maersk achieved revenue of 15.762 billion US dollars, an increase of 30%, of which shipping business revenue increased 40.6% to 11.107 billion US dollars.
Since November 2023, Yemen's Houthi armed forces have repeatedly attacked ships in the Red Sea and nearby waters, and many shipping giants around the world have no choice but to suspend container ships in the Red Sea and its adjacent waters and divert them around the Cape of Good Hope in Africa, which has led to a reduction in global shipping capacity and a rise in freight rates.
The current changes in the maritime market have not yet had an impact on the freight rates of China-Europe freight trains.
A freight forwarder responsible for the Sino-European freight train told reporters that compared with the volume of sea freight, the volume of Sino-European freight train transport is very small, and the market demand is relatively small. At present, most of the platforms to book space are more surplus, Chengdu, Xi 'an, Zhengzhou and other places to Europe freight at the end of October slightly decreased, but the overall freight is relatively stable.
