Container marine market may lose momentum in Q3? –
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Container marine market may lose momentum in Q3?

2022-08-15 08:22:45 CCFGroup

According to the latest freight index of SCFI, the freight has extended lower for consecutive eight weeks and the decrement of European route and Southeast Asian line was relatively bigger. Falling freight was mainly because of reducing cargo quantity. By convention, the cargos would increase again after the Lunar New Year's Day holiday and Mar, while it failed to rise until Jun. Market players realized that it was not supply issue but the demand problem. The port congestion problem has not been solved in Europe and U.S. and the supply chain kept very weak. Some big forwarders and logistic companies thought the freight may rebound if demand improves later.


According to the data collected by CCFGroup, by Aug 10, the freight from Ningbo port to Brazil/NAV was at US$9,400/40HQ, which may be at US$9,000/40HQ next week, that to Pakistan/Karachi was at US$2,500/40HQ and that to Egypt/SOK was at US$4,600/40HQ. The performance of major routes were as follows: 


Route  Description
Europe and Mediterranean  Supply still exceeded demand. The freight continued reducing and the decrement expanded.
North America  Demand was apparently insufficient in W/C American service and the spot booking price declined more. The supply and demand was stable in E/C American service, and the freight was relatively stable.
Thailand and Vietnam  The freight kept decreasing substantially due to thin transportation demand.


The negotiations broke down! The shutdown of European ports is inevitable due to the coming strike on Aug 21-28! 

Negotiations held by the ACAS Mediation Service in order to avoid a strike at Felixstow, Britain's largest container port, broke down on the evening of the Aug 9th local time. The strike is inevitable and the port is facing a shutdown, which will not only affect logistics and transport in the region, but also have an impact on international seaborne trade in the region.


Before the eight-day strike began on Aug 21, the two sides had no plans to hold further negotiations, shipping companies have planned to reschedule ships at the port, and some shipping companies are considering allowing ships to arrive early in order to unload British imports.


Hapag-Lloyd and Maersk adjust up annual performance forecast for 2022


Company Performance 
Maersk Maersk released its Q2 results in early-Aug: the operating income surged by 52% on the year to $21.7 billion; the net profit hiked by 130% on annual basis to be $8.6 billion, with the net profit of H1 2022 at $15.4 billion. The EBITDA was at $10.3 billion, up 104% over the same period of last year, the EBIT was at $9 billion, up 120% year on year, and the free cash flow was at $6.8 billion.

Maersk adjusts up annual performance forecast for 2022 based on strong performance in H1 2022. It is estimated that the actual EBITDA for the whole year of 2022 may be about $37 billion, the actual EBIT is expected to be about $31 billion, and the free cash flow may exceed $24 billion.
Hapag-Lloyd Hapag-Lloyd also revised up its performance forecast for 2022 after the operating income grew in the first half of year. Hapag-Lloyd currently expects operating results of EUR18.2-20.1 billion in 2022, compared with previous expectations of EUR13.6-15.5 billion. At the same time, the interim operating results were expected to reach EUR 10 billion in the first half of the year.
ONE In the first quarter of fiscal 2022, ONE realized operating income of $9.019 billion, up 56% from the same period last year; profit before interest and tax (EBIT) was $5.561 billion, up 109% on annual basis; profit before interest, tax, depreciation and amortisation (EBITDA) reached $5.859 billion, up 100% on the year; and net profit was $5.499 billion, up 115% year on year.

Although the fundamentals of tight supply and demand in the container marine market have eased somewhat, freight rates remained stable and significantly higher than in the same period last year. The ONE's first-quarter results hit an all-time high in Q1 2022.


Online booking price of W/C American service slumps

Some shipping agent from Taiwan, China expressed to have received the special freight rate of the Wanhai Line in terms of W/C American service, with a shock price of $5,200/40GP, effective during Aug 12-31. A large freight forwarder pointed out that the price of online booking of the top three container shipping companies has fallen below $6, 000 to $5,700-5,800 in Aug. Wanhai, which originally quoted $5,600, further reduced its prices. However, the freight rates of E/C American service and inland United States were still high due to port congestion and land transportation problems.


However, because Wanhai has no dedicated terminals in the United States, the scale of operation and the scope of services were much smaller, and the schedule performance was always low, there was no reason for the freight rates of the three major shipping alliances to be greatly reduced. At present, the average freight rate of the W/C American service was about $6,000, which was three times the cost price of $2,000.


China announces zero-tariff treatment for least-developed countries

China will offer zero-tariff treatment on 98 percent of taxable products from 16 least-developed countries, including Togo, Djibouti, Cambodia and Rwanda, according to a statement released by the Customs Tariff Commission of the State Council on Monday.


Coming into force on September 1, the move will facilitate to share market opportunities with these countries, push for common growth and advocate the building of a community with a shared future for mankind, said the statement.


Views toward market outlook

Shifl, a digital freight forwarding platform, said the sharp reduction of freight rates in the first half of 2022 was due to the collapse in demand as a result of tighter global monetary policy, a shift in consumer spending from goods to services, inflated retail inventories in the US and Europe and falling production in China.


Due to dwindling demand, the spot freight rate for 40-foot containers from China to Los Angeles in Jul 2022 was 62% lower than in Sep 2021 and 59% lower than in Jan 2022; and the freight rate from China to New York was 52% lower than in Sep 2021 and 48% lower than in Jan 2022. Although current freight rates to W/C America and E/C America were still a large gap from the levels of $1,350/FEU and $2,850/FEU before the outbreak of COVID-19, shippers were less pressed due to such reduction.


Analysts from Maritime Strategies International Ltd (MSI) continued expecting the container marine market to "lose momentum" in Q3. With eased supply chain disruption and cooler demand from consumers, the freight extends lower and may reduce more in Q4.


MSI expressed that such downtrend may continue into 2023 and it expects market environment to be close to the pre-pandemic level by that time.  It pointed out that the spot freight has continued dropping year to date and there is no reason to change such trend.


According to the MSI, although the container market is entering the peak season, it now seems that the downward pressure of the epidemic and rising global inflation have exerted a heavy blow to cargo demand.


Some market players expected the freight of many routes from China may fluctuate less in short run and the decrement will narrow. Once demand improves, the freight is still likely to rebound.