At the end of 2023, affected by the Red Sea crisis, international shipping prices continued to rise. In particular, freight rates on European and American routes doubled in just one month. May is the traditional off-season for the international shipping market, but this year the situation is different. Since the end of April, freight rates on European and American routes have generally increased by double digits, with freight rates on some routes soaring by nearly 50%. “It’s hard to find a box.” “The situation arises again.
Shipping prices continue to rise
Data from the Shanghai Shipping Exchange shows that on May 17, the Shanghai export container freight index reported 2520.76, a nearly 30% increase from April 26. In addition, as of May 13, the Shanghai Export Container Settlement Freight Index for the European route reported 2512.14 points, an increase of 15.5% from April 29, and the West-American route reported 2508.00 points, an increase of 38.4% from April 29.
Zhang Jie, marketing director of Shanghai Hengtie International Logistics Co., Ltd., said, “The month-on-month increase on many routes has even reached 40% to 50%. For example, the freight rate of a 40-foot container on the European route in April was about US$4,000, and it has already increased in May. At around US$6,000, space on some routes is hard to come by, making it difficult for exporters to book ideal shipping dates.”
According to market data, the main contract of the Shanghai International Energy Trading Center Container Index (European Line) futures closed at 4033.5 points on May 15. In comparison, in mid-November last year, the quotation of the main contract was less than 800 points, which means , Container Shipping Index (European Line) futures quotations have increased approximately five times in half a year.
At the same time, the shipping market, which is already the off-season, has set off a “tide of price increases.” Leading shipping companies such as Maersk, CMA CGM, and Hapag-Lloyd have disclosed information on route freight increases. The price increases cover Asia, Europe, North America, For routes in multiple directions such as South America, some routes have seen an increase of nearly 70%. COSCO Shipping Container Lines Co., Ltd. also issued a price increase notice, saying that shipping prices from the Far East to the United States and Canada will rise significantly, with an increase of US$1,000 to US$2,000.
The background of the recent continuous surge in freight rates is that many trunk lines in the shipping industry are already fully loaded. As for the reasons for the increase in freight rates, industry insiders and institutions generally believe that it is a combination of multiple factors, one of which is the increase in the cost of some routes. Against the background of freight rates rebounding strongly from the bottom, the performance of shipping industry chain companies has rebounded significantly since the beginning of this year. Regarding the subsequent freight price trends, some industry insiders believe that there are still many uncertain factors and it is impossible to make accurate and qualitative predictions.
Price increases are affected by multiple factors
Industry analysts pointed out that the current shipping price trend is affected by a variety of factors, including the sustainability of economic recovery, changes in the geopolitical situation, and the development of the supply and demand relationship of shipping capacity.
A report from Industrial Securities shows that interest rates will peak at the end of 2023, and demand for U.S. goods will gradually increase. At the same time, the United States has ended its destocking cycle that lasted for one and a half years and began to replenish its stocks. Specifically, industries that are highly dependent on exports, such as equipment, furniture, and textiles, are already showing signs of restocking. The U.S.’s restocking and imports are basically synchronized, so the increase in U.S. import growth may boost the exports of related countries. Therefore, this year’s peak shipping season has arrived early, and coupled with the problem of insufficient supply of shipping capacity, freight rates have naturally risen rapidly.
In addition, in the first quarter of 2024, the performance of shipping industry chain companies has rebounded significantly, which can be clearly seen from the financial report data of relevant companies. For example, the international shipping giant Maersk stated in its recently released first quarter 2024 financial report that it achieved operating income of US$12.355 billion in the first quarter, a year-on-year decrease of 13%, but an increase of 5.2% compared with the fourth quarter of 2023. Maersk said that due to the good performance of the terminal business and the dual impact of increased demand and the ongoing Red Sea crisis, the company’s performance was in line with expectations, and revenue recovery was strong compared with the fourth quarter of 2023.
Maersk CEO Ke Wensheng said: “Demand trends are trending towards the upper line of market growth in previous financial expectations, and the outlook for the next few quarters is also clearer. However, due to the larger number of new ships delivered this year and next, this is expected to offset the above The positive impact of factors has put pressure on the shipping market again. Therefore, we will continue to carry out cost control to reduce the additional costs caused by the disruption to the shipping business and increase the profits of the logistics and service business.”
The Red Sea detour is also one of the factors leading to rising container shipping prices. Some analysts said in a research report that the Red Sea crisis has forced more ships to avoid the Red Sea route and go around the Cape of Good Hope in Africa, causing global container shipping congestion. The container shipping industry has experienced a supply and demand contraction while the delivery of new shipping capacity has hit a record. Tight question. The long-term trend of container ships detouring the Red Sea is obvious. Detouring has caused the navigation distance to increase by about 29%, and the demand for shipping has also increased accordingly.
Freight prices are expected to cool down in the second half of the year
Industry insiders believe that this wave of rising shipping prices is driven by a combination of factors such as the situation in the Red Sea, foreign trade companies’ rush for exports, and shipowners raising prices. It is expected that freight rates will still fluctuate at high levels in the short term, but will not continue to increase significantly. This freight rate increase will not last long and is expected to ease within three months.
“In view of the huge increase in the current round of major European and American routes, which has nearly doubled, and with the end of the off-season suspension, the injection of new shipping capacity by shipping companies, and the end of the short-term rush for electric vehicles, batteries and energy storage equipment, it is expected that there will be no further substantial increase in the future. market foundation,” said Jia Dianrui, founder and CEO of Ruixiang Steel Group.
French shipping company CMA CGM predicted when announcing its first-quarter financial results that as the delivery of new ships accelerates, global shipping capacity will be boosted and shipping rates are expected to decline in the future. “The situation in the Red Sea absorbed almost all the new capacity that came to market in the first quarter,” Ramon Fernandez, the company’s chief financial officer, said on a conference call. He expected upward pressure on freight rates due to regional conflicts and strong consumer demand. It will fall in the second half of this year.”
Fernandez predicts that the global fleet will grow by 10% this year and will grow by about 7% in the future. “This will lead to overcapacity in the maritime freight industry, and the detour around the Cape of Good Hope will not be enough to absorb the excess capacity.”
In addition to CMA CGM, international shipping giant Maersk has also recently predicted that there will be a general excess of global shipping capacity in the second half of this year, which means freight rates will fall. (Ruixiang Steel Group)
