Faced with the overall sluggish export situation of Asian economies, the cost of transporting goods from Asia to the United States has quietly begun to rise rapidly. This has to be said to be a rather strange thing.
Shipping costs rise
On the 18th, data released showed that Japan’s exports fell for the first time in more than two years due to declining demand in many important overseas markets, indicating that the economic recovery is facing heavy resistance.
Around Japan, the export data of major Asian trading countries such as South Korea and Vietnam are also bleak.
However, in the freight market, a completely different scene seems to be present now.
The average spot rate for a 40-foot equivalent container shipped from China to the U.S. West Coast rose 61% to $2,075 in the six weeks to August 15, according to transportation data and procurement company Xeneta.
Industry insiders generally say that the main reason for this price increase is that large shipping companies have made artificial price adjustments.
Shipping giants such as Maersk and CMA CGM, whose performance is still plummeting, have increased shipping fees such as comprehensive rate surcharges and container rates on some routes.
Before this round of price increases, the price of container freight from China to the West Coast of the United States plummeted from nearly US$10,000 per box in February 2022 to less than US$1,300 in late June. The reason was that retailers had excessive inventory and reduced orders. And weak demand has cut into earnings at major shipping companies.
Peter Sand, chief analyst at Xeneta, pointed out that before the epidemic, the sharp surge in freight costs might scare importers. But now that people have witnessed the high shipping costs last year, the $2,000 price no longer scares them.
A set of historical comparisons shows that the container freight rate from China to the West Coast of the United States is still US$600 higher than the same period in 2019, but 66% lower than the same period last year.
may fall again
Importers and shipping industry experts expect the recent increase in spot freight rates to be short-lived – U.S. container imports remain below year-ago levels, while some ocean shipping lines have begun taking delivery of new container ships they ordered during peak demand, possibly Inject additional capacity into the market.
Data from Danish shipping trade organization Bimco show that in the first seven months of 2023, the delivery of new container ships was equivalent to an increase in shipping capacity of 1.2 million containers, setting a record.
Ocean shipping giants such as Maersk have now reduced supply by taking some container ships out of service and slowing them down, effectively draining capacity. But Philip Damas, managing director of Drewry Shipping Consulting Group, said more container ships were expected to enter service next year.
Damas said, “The wave of overcapacity will definitely affect the global shipping industry. Therefore, we expect to see spot freight rates resume their downward trend this autumn.”
Some shipping lines are currently trying to extract more profits from long-term contracts, where fixed freight rates tend to be higher than in the more volatile spot market, by adding peak season surcharges.
In the past, shipping lines have often adopted this strategy to cope with strong demand during the fall and year-end holidays.
Overall performance of liner companies declined
In the first half of 2023, the operating income and net profit of the world’s major liner companies have both fallen sharply. Although the decline is expected, the magnitude of the decline is beyond imagination. Liner companies that have received dividends in the past two years are accepting the severe test of the market. .
Judging from the first quarter results, except for Mediterranean Shipping, which has not publicly released financial reports, the world’s top ten liner companies have a combined revenue of approximately US$41 billion, with an average decline of 53%.
Among them: Maersk’s revenue was US$14.2 billion, a year-on-year decrease of 26%, and its net profit dropped 68% year-on-year; CMA CGM’s revenue was US$12.72 billion, a year-on-year decrease of 30.2%, and its net profit decreased by 72.1% year-on-year;
COSCO Shipping Group’s revenue was US$6.72 billion, a year-on-year decrease of 45%, and its net profit dropped 77% year-on-year; Hapag-Lloyd’s revenue was US$6.028 billion, a year-on-year decrease of 26%, and its net profit fell 68% year-on-year.
The obvious decline in the performance of liner companies in the first quarter is directly related to the current lack of demand in the container shipping market and falling freight prices. Against the background of insufficient growth momentum in shipping demand and large-scale delivery of new ships, the container shipping market will gradually transform into a buyer’s market.
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