In this traditional off-season for shipping, tight shipping spaces, soaring freight rates, and a strong off-season have become key words in the market. Data released by the Shanghai Shipping Exchange shows that from the end of March 2024 to the present, the freight rate from Shanghai Port to the basic port market in South America has increased by 95.88%, and the freight rate from Shanghai Port to the basic port market in Europe has increased by 43.88%.
Industry insiders analyze that factors such as improved market demand in Europe and the United States and the protracted conflict in the Red Sea are the main reasons for the current increase in freight rates. With the arrival of the traditional peak shipping season, container shipping prices may continue to rise in the future.
European shipping costs increased by more than 20% in a week
Since the beginning of April 2024, the Shanghai Export Container Comprehensive Freight Index released by the Shanghai Shipping Exchange has continued to rise. Data released on May 10 showed that Shanghai’s comprehensive export container freight rate index was 2305.79 points, an increase of 18.8% from the previous week, an increase of 33.21% from 1730.98 points on March 29, and an increase of 33.21% from 1730.98 points on March 29, which was higher than that in November 2023 before the outbreak of the Red Sea crisis. An increase of 132.16%.
Among them, routes to South America and Europe experienced the highest increases. The freight rate (sea freight and sea freight surcharges) exported from Shanghai Port to South America’s basic port market is US$5,461/TEU (container with a length of 20 feet, also known as TEU), an increase of 18.1% from the previous period and an increase of 95.88% from the end of March. The freight rate (shipping and shipping surcharges) exported from Shanghai Port to the European basic port market is US$2,869/TEU, a sharp increase of 24.7% from the previous week, an increase of 43.88% from the end of March, and an increase of 305.8% from November 2023.
The person in charge of the shipping business of the global digital logistics service provider Yunqunar Logistics Technology Group (hereinafter referred to as “Yunqunar”) said in an interview with reporters that starting from late April this year, it can be felt that shipments to Latin America, Europe, North America, and Freight rates for routes in the Middle East, India and Pakistan have increased, and the increase has been even more pronounced in May.
Data released by Drewry, a shipping research and consulting agency, on May 10 also showed that the Drewry World Container Index (WCI) rose to $3,159/FEU (container with a length of 40 feet) this week (as of May 9), which is consistent with 2022 It increased by 81% compared with the same period last year and was 122% higher than the average level of US$1,420/FEU before the epidemic in 2019.
Recently, many shipping companies, including Mediterranean Shipping Company (MSC), Maersk, CMA CGM, and Hapag-Lloyd, have announced price increases. Take CMA CGM as an example. At the end of April, CMA CGM announced that starting from May 15, it would adjust the new FAK (Freight All Kinds) standards for the Asia-Northern Europe route to US$2,700/TEU and US$5,000/FEU. Previously, they had increased by US$500/TEU and US$1,000/FEU; on May 10, CMA CGM announced that starting from June 1, it would increase the FAK rate for cargo shipped from Asia to Nordic ports. The new standard is as high as US$6,000/FEU. Once again Increased by $1,000/FEU.
Ke Wensheng, CEO of global shipping giant Maersk, said in a recent conference call that cargo volume on Maersk’s European routes has increased by 9%, mainly due to strong demand from European importers to replenish inventories. However, the problem of tight space has also arisen, and many shippers have to pay higher freight rates in order to avoid cargo delays.
While shipping prices are rising, China-Europe freight train prices are also rising. A freight forwarder in charge of China-Europe freight trains told reporters that the current freight demand for China-Europe freight trains has increased significantly, and freight rates on some lines have increased by US$200-300, and are likely to continue to rise in the future. “The price of sea freight has increased, and the warehouse space and timeliness cannot meet customer demand, causing some goods to be transferred to railway shipments. However, railway transportation capacity is limited, and the demand for shipping space has increased significantly in the short term, which will definitely affect freight rates.”
Container shortage problem returns
“Whether it is shipping or railway, there is a shortage of containers. In some areas, it is impossible to order boxes. The cost of renting containers on the market is greater than the increase in freight rates.” A person in the container industry in Guangdong told reporters.
For example, he said that the cost of using a 40HQ (40-foot-high container) on the China-Europe route was US$500-600 last year, which rose to US$1,000-1,200 in January this year. It has now risen to more than US$1,500, and exceeds US$2,000 in some areas.
A freight forwarder at Shanghai Port also told reporters that some overseas yards are now full of containers, and there is a serious shortage of containers in China. The price of empty boxes in Shanghai and Duisburg, Germany, has increased from US$1,450 in March to the current US$1,900.
The person in charge of the above-mentioned shipping business of Yunqunar stated that an important reason for the surge in container rental fees is that due to the conflict in the Red Sea, a large number of shipowners detoured to the Cape of Good Hope, which caused the container turnover to be at least 2-3 weeks longer than the normal time, resulting in empty containers. Liquidity slows.
The global shipping market trends (early to mid-May) released by Dexun Logistics on May 9 pointed out that after the May Day holiday, the overall container supply situation has not improved significantly. There are varying degrees of shortage of containers, especially large and tall containers, and some shipping companies continue to strengthen control over the use of containers on Latin American routes. New containers made in China have been booked before the end of June.
In 2021, affected by the COVID-19 epidemic, the foreign trade market “first declined and then rose”, and the international logistics chain experienced a series of unexpected extreme states. The return flow of containers scattered around the world is not smooth, and the global distribution of containers is seriously uneven. A large number of empty containers are backlogged in the United States, Europe, Australia and other places, and my country is in short supply of export containers. Therefore, container companies are full of orders and have full production capacity. It was not until the end of 2021 that the shortage of boxes gradually eased.
With the improvement of container supply and the recovery of operating efficiency in the global shipping market, there was an excessive backlog of empty containers in the domestic market from 2022 to 2023, until there was a container shortage again this year.
Freight prices may continue to rise
Regarding the reasons for the recent sharp rise in freight rates, the person in charge of the above-mentioned shipping business of YQN analyzed to reporters that first, the United States has basically ended the destocking stage and entered the restocking stage. The transportation volume level of the trans-Pacific route has gradually recovered, which has boosted the Freight rates rise. Second, in order to avoid possible tariff adjustments by the United States, companies going to the U.S. market have taken advantage of the Latin American market, including the automobile manufacturing industry, infrastructure industry, etc., and have transferred their production lines to Latin America, resulting in a concentrated explosion of demand for Latin American routes. Many shipping companies Routes to Mexico were added to meet increased demand. Third, the situation in the Red Sea has caused a shortage of resource supply on European routes. From shipping spaces to empty containers, European freight rates are also rising. Fourth, the peak season of traditional international trade is earlier than in previous years. Usually June each year enters the overseas summer sales season, and freight rates will rise accordingly. This year’s freight rates increased one month earlier than in previous years, which means that this year’s peak sales season has arrived early.
Zheshang Securities released a research report on May 11 titled “How to view the recent counterintuitive surge in container shipping prices?” It stated that the protracted conflict in the Red Sea has led to supply chain tensions. On the one hand, ship detours have led to an increase in shipping distances. , On the other hand, the decline in ship turnover efficiency has led to tight container turnover at ports, further exacerbating supply chain tensions. In addition, the demand-side margin is improving, macroeconomic data in Europe and the United States are improving marginally, and coupled with expectations for rising freight rates in the peak season, cargo owners are stocking up in advance. Moreover, the US line has entered a critical period of signing long-term agreements, and shipping companies have the motivation to increase prices.
At the same time, the research report believes that the high concentration pattern and industry alliances in the container shipping industry have formed a driving force to boost prices. Zheshang Securities said that foreign trade container liner companies have a high degree of concentration. As of May 10, 2024, the top ten container liner companies accounted for 84.2% of the transportation capacity. In addition, industry alliances and cooperation have been formed between companies. On the one hand, in In the context of a deteriorating supply and demand environment, it is helpful to slow down vicious price competition by suspending sailings and controlling transport capacity. On the other hand, in the context of an improving supply and demand relationship, it is expected to achieve higher freight rates through joint price increases.
Since November 2023, Yemen’s Houthi armed forces have repeatedly attacked ships in the Red Sea and adjacent waters. Many shipping giants around the world have had no choice but to suspend the navigation of their container ships in the Red Sea and its adjacent waters and change their routes around the Cape of Good Hope in Africa. This year, the situation in the Red Sea is still escalating, and the shipping arteries are blocked, especially the Asia-Europe supply chain, which has been greatly affected.
Regarding the future trend of the container shipping market, Dexun Logistics said that in view of the current situation, freight rates will remain strong in the near future, and shipping companies are already planning a new round of freight rate increases.
“Container freight rates will continue to rise in the future. First, the traditional overseas sales peak season is still continuing, and the Olympics will be held in Europe in July this year, which may push up freight rates; second, destocking in Europe and the United States has basically ended, and domestic sales in the United States It is also constantly raising its expectations for the development of the country’s retail industry. Due to rising demand and tight shipping capacity, freight rates are expected to continue to rise in the short term,” said the above-mentioned Yunqunar source.
Post time: May-17-2024
