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Container marine market: spot freight of major routes extends lower

2022-07-29 08:51:27 CCFGroup

According to the latest freight index of SCFI, the freight has continued decreasing for consecutive four weeks. The freight from Far East to the Europe, Mediterranean, West America and East America all dropped over last week and the decrement of West and East America route was relatively bigger, while that to South America increased. The freight of Asia near-sea South Korea line also extended higher.

According to the data collected by the CCFGroup, by Jul 6, the freight from Ningbo port to Egypt/SOK was near US$8,000/40HQ, that to Indonesia/ Jakarta was around US$2,300/40HQ and that to Brazil/NAV scored at US$10,500/40HQ.

Europe and Mediterranean routes: Recently, there have been strikes across Europe, extending the original port congestion problem from the US to Europe, including Hamburg in Germany and the port of Antwerp in Belgium. Although the port of Rotterdam in the Netherlands has not gone on strike, due to the transfer of cargo from the ports of Hamburg and Antwerp, the port was also relatively busy, and the waiting time for ships to enter the port has been lengthened.

North America route: According to data released by the Institute for Supply Management (ISM), the national factory activity index fell to 53.0 in Jun, the lowest since Jun 2020, indicating a sharp slowdown in US economic growth in the future. In addition, in order to continue to control inflation, the Federal Reserve was forced to continue to raise interest rates, and the US economy may face stagflation in the future. Affected by this, the transport demand was basically stable, and the market freight rate continued shivering.

Shipping companies took the lead in reducing spot rates to heighten the competitiveness

Worried about the deterioration of the market, shipping companies "took the lead" to reduce spot freight rates to weaken the competitiveness of freight forwarders, reflecting the desire of shipping companies to secure supply amid fears of a worsening market.

As of July 6, spot rates from Asia to the west coast of the U.S. were about $7,000/FEU, while rates on the east coast have been relatively stable, with rates per FEU remaining above $10,000 this year, according to Drewry. When annual service contracts were signed in spring, the direction of spot prices is closely related to the pricing agreed in these contracts. This spring, the increase in spot rates led to service contract rates of $8,000 to $10,000/FEU signed by medium-sized shippers. Now the average spot price of west coast of the US was close to $6,500/FEU and going all the way down, customers naturally tended to book their containers at lower spot market prices.

Congestion of containers worsening at ports

At present, the congestion of container ports was becoming more and more serious worldwide. Clarkson's container port congestion index showed that as of Jun 30, 36.2% of the world's fleets were stranded in ports, up from 31.5% before the outbreak in 2016-2019. Clarkson pointed out that the congestion on the east coast of the US has recently risen to near record levels.

Market	Description
Asia	Due to the continuing epidemic and seasonal typhoons, China's major ports such as Ningbo, Shenzhen and Hong Kong will face the pressure of yard congestion and berth congestion. It was reported that the yard density of other major ports in Asia, Singapore, reached 80%, while that of Busan, South Korea's largest port, was even higher, at 85%.
Europe	The start of summer vacation, round of strikes, increasing cases of COVID-19 and the influx of ships from Asia have caused congestion in many ports such as Antwerp, Hamburg, Le Havre and Rotterdam.
Latin America	Ongoing national protests have hampered port operations in Ecuador. Cyber attacks on Costa Rican customs systems two months ago were still causing problems. Mexico was one of the countries most affected by the spread of port congestion, with many ports reported to have yard density as high as 90%, causing serious delays.
North America	Reports of terminal delays have dominated shipping headlines throughout the outbreak and are still worrisome into July. Hapag-Lloyd pointed out that the waiting time for berths in New York/New Jersey was more than 19 days. Savannah's berth waiting time was 7-10 days, close to record levels.
West America	On July 1, the two sides of West America dockers failed to reach an agreement in negotiation, which cast a shadow over the slowdown and strike of the dock. In Jan-Jun, 2022, US imports from Asia increased by 4%, while imports through the West America fell by %, which accounted for 54% of all US imports, down from 58% last year. The East America and the Gulf of Mexico recorded double-digit growth, particularly in the Gulf of Mexico, with an increase of nearly 30%.

At the beginning of the peak season, the current plight of the terminal has not yet translated into an improvement in spot freight rates. Although still incredibly high, the spot rates remained on a downward trend for most of 2022.

Statistics analyzed by Sea-Intelligence, based in Copenhagen, showed that 9.8% of the world's fleet was unusable by the end of May due to supply chain delays, down from a peak of 13.8% in Jan and down from 10.7% in Apr.

The level of shipping capacity withdrawn from the market in May 2022 was still higher than that in 2020 and 2021. "It means that at the beginning of the peak season, the global fleet has lacked more capacity than in the same period in 2021," Sea-Intelligence warned.

Schedule reliability still hit historic low

According to the latest report from sea intelligence, in May 2022, the reliability of the ship increased by 2.1 percentage points to 36.4%. However, this figure was still 2.3 percentage points lower than the annual figure, which meant that each of the first five months of 2022 was slightly lower than it was in 2021.

COSCO's single quarter net profit hit record high

On July 6, shipping leader COSCO Sea Control, with a total market capitalization of more than 220 billion yuan, issued a semi-annual performance advance announcement, which is expected to make a net profit of about 64.716 billion yuan in the first half of 2022, an increase of about 74.45 percent over the same period last year.

The net profit of Q1 was 27.62 billion yuan. Based on this calculation, the net profit of Q2 is expected to be 37.096 billion yuan, an increase of 34% over the previous month, setting a new record for single-quarter net profit set in the third quarter of 2021.

Views of later market

Sundara, global head of shipping for a large consignor in Singapore, expressed that: it may be a fact for economic downturn and softening market. Meanwhile, the circulation of cargos in other markets including raw materials is undergoing. As an operator, there is no real incentive to lower contract rates. In general, the supply chain challenges remain, which is good for operators.

Some insiders pointed out that the ocean shipment may warm up when the port congestion in Europe and US is expected to be hard to be solved in short run and demand for year-end procurement and peak season demand is improving. As a result, the freight rate may be pushed up. Meanwhile, the recovery of China's domestic market after the epidemic, coupled with the restructuring of the supply chain caused by the Sino-US trade war, has led to the formation of a "Dual Circulation" economic model of both production and consumption, and the demand for domestic trade warehousing and transportation has continued to grow.

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