2021 can be regarded as the most “bullish” year for shipping in the past 50 years. Many shipping companies have made the money they made in the past 10 years in one year.
By mid-2022, the sky-high freight rates have finally eased, approaching the level of the same period last year.
On June 24, the Shanghai Export Container Freight Index (SCFI) for the latest week released by the Shanghai Shipping Exchange has shown signs of falling from its high level.
However, no matter how it falls, the index is still at a historical high of 4216.13 points – in the ten years since its release to before the epidemic, it spent most of the time below 1,000 points.
On June 24, the market freight rates (shipping and shipping surcharges) exported from Shanghai Port to the basic ports in the West and East US were US$7,378/FEU and US$9,804/FEU respectively, down 1.5% and 2.7% respectively from the previous period. . The freight rate per 40-foot container on the US East Line fell below the US$10,000 mark for the first time since July 30, 2021.
For the European route, the market freight rate (shipping and shipping surcharges) for exports from Shanghai Port to European basic ports is 5,766 US dollars/TEU, down 0.5% from the previous period; the market freight rate (shipping and shipping surcharges) for exports from Shanghai Port to basic ports in the Mediterranean is Surcharge) was US$6,425/TEU, down 1.0% from the previous period.
A cargo owner who ships to the United States said: “The freight rate from China to the West United States dropped from about 13,000 US dollars before the Spring Festival to about 8,000 to 9,000 US dollars in late March. Because the shipping price last year The price is rising, and everyone’s ability to bear the price is now relatively low, so they are not so anxious to ship goods, and the shipment volume has also dropped significantly; the price in June was almost 8,000 US dollars, and it is estimated that there is room for further decline.”
Data show that the volume of imported containers at the top ten ports in the United States has dropped by an average of 25% since May this year. Data from the Southern California Maritime Exchange shows that ships waiting to unload at the Port of Los Angeles and Long Beach have recently dropped from 109 in January this year. The number of ships was reduced to 22.
The latest data from the Baltic Index shows that the recent freight rate per container from China to the West United States is US$9,585, a 34% decrease from the beginning of this year and a 50% decrease from the same period last year, but it is still four times that of June 2020.
However, there is still a big surprise in the US shipping line: The current contract involving labor rights at 29 ports in California, Oregon and Washington will expire on July 1. Now the labor representative ” The International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), which represents the owners, are negotiating in San Francisco. If there is disagreement, the employer may go on strike.
Isaac Larian, CEO of MGA Entertainment, the world’s largest toy manufacturer, said:“I’m very nervous because I’ve seen this happen before. There are no alternatives to these ports and I’m praying twice a day now to replace the original Once a day.”
In Europe, the “thunder” of strikes has exploded.The first strike in Hamburg, Germany’s largest port, in 30 years has further intensified port congestion. The Port of Antwerp-Brugge, Europe’s second largest port, has also been hit hard by the strike.
There is currently a growing backlog of undelivered cargo at European ports. That’s forcing shipping companies to prioritize shipping containers with full cargo, leaving empty containers vital to Asian exporters being stuck in export hubs like the Dutch port of Rotterdam.
Maersk’s latest situation announcement for major ports in Northern Europe states thatBremerhaven, Rotterdam, Hamburg and Antwerp are all facing continued congestion, which has even reached critical levels. Some traders are worried that the recent strike by European dockworkers will cause the Nth impact on the global supply chain this year.
Professionals pointed out that the market is now at a very delicate time. Both parties are waiting. Shipping companies are waiting for cargo volume to increase, and cargo owners are waiting for freight rates to continue to drop. The contract price signed by cargo owners is now very high. He will consider whether to break the contract, but he is also worried that if he breaks the contract, he will not be able to get space from the shipping company during the peak season. If the market has not fully recovered by mid-July, both parties will have to make a decision, and the shipping company may make capacity adjustments to adapt to the new market changes.
The current common view in the shipping industry is that the epidemic has brought special opportunities to shipping. Over the past two years, congestion in the supply chain has resulted in significantly longer shipping times, not only related to maritime delays but also to inland congestion and delays. The greater the problems in the supply chain, the greater the need for ocean freight. Some people in the shipping industry describe this phenomenon as a “structural boom” in the shipping industry, and speculate that once the phased problems caused by the epidemic are over, some demand will naturally If the land “disappears”, then the shipping industry may face the challenge of overcapacity.
So in the face of the continuous decline in freight rates, shipping companies have chosen to continue the strategy of “stopping sailings and jumping to ports” to stabilize market freight rates. According to the latest data from Drewry: the suspension arrangements for the next five weeks, the three major airlinesA total of 48 routes were canceled, of which 2M announced 23 cancellations, The Alliance announced 19 cancellations, and Ocean Alliance canceled 6 times. The vast majority of this will occur on eastbound trans-Pacific routes, primarily to the U.S. West Coast.
Skou, CEO of Maersk, the world’s second largest container shipping company, said in an interview that the factors that previously drove the boom in container shipping during the first wave of the COVID-19 epidemic may reverse significantly after August. The “bullwhip effect” of shrinking demand and increasing supply has impacted container transportation. He said: “The factors that have led to the boom in container shipping since the end of the first wave of the pandemic may soon reverse sharply.”
“When that happens, it will happen quite quickly and we expect this (the drop in traffic) to be unlikely to happen early in the second half and probably not until August or later,” Skou said “I don’t want to say I’m scared.”
The third quarter is the traditional peak season for shipping, but two major factors, including inflation and the lifting of lockdown, are changing consumer behavior in Europe and the United States. Inflation affects consumer confidence in Europe and the United States. After the lifting of lockdown, consumption shifts from goods to services, which may slow down manufacturing in Europe and the United States. The industry and retail industry are pulling goods.
Industry insiders said that according to the usual practice, European and American retailers and manufacturing industries start to pull goods in July, but this year there is a strong wait-and-see atmosphere. The soaring freight rates during the peak season of sea transportation last year may not be repeated, and the trend of cargo volume and freight prices may be difficult to reproduce. It will be clearer in mid-to-late July.
Attachment: Strikes in many European countries affect sea, land and air transportation
Recently, due to high inflation, food and energy prices have continued to rise, and it has been difficult to reach an agreement on labor salary increases. Strikes by worker unions in various places have occurred one after another, and sea, land and air freight have been affected to varying degrees.
Germany: Due to the breakdown of wage increase negotiations, the Ver.di union, which represents about 12,000 workers at seaports such as Emden, Bremerhaven, Brake, Wilhelmshaven and Hamburg, separately Warning strikes were held on June 9 and 23, and port operations were suspended, resulting in a backlog of ships in the German North Sea.
Belgium: On June 20, Belgian trade unions went on strike, causing serious disruptions to public transportation services and airports in the country. The operations of the Port of Antwerp-Brugge, one of Europe’s largest ports, were also affected.
UK: About 40,000 railway workers in the UK went on strike on June 21, 23 and 25. This was the country’s largest railway strike in 30 years. The strike caused severe disruption to the rail network, bringing most services to a standstill.
As the “summer of discontent” spreads across Europe, Spanish and French employees at low-cost airlines such as Ryanair and easyJet have recently announced new strikes to express their protest against poor working conditions.
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