In today’s shipping market, nothing is impossible. Just after 2020, container shipping is still full.
The fear is coming. US freight rates suddenly jumped, soaring nearly 10% overnight, but this may be just the beginning. High freight prices will follow into 2021, and the challenges faced by the container shipping market will also continue into 2021. DHL and Hapag-Lloyd predict that continued high freight rates and container shortages will not recover until the second half of 2021.
Shipping companies raised costs, and trans-Pacific freight rates suddenly jumped
Trans-Pacific market freight rates After remaining stable for a period of time, the price has recently started to rise again.
According to the Freightos Baltic Daily Index, on December 28, 2020, the freight rate on the Asia-US West Coast route reached US$4,189/FEU, setting a record high and higher than It rose 8% on December 25, which was three times the same period in 2019.
At the same time, Asia-U.S. East Coast The route freight rate also reached an astonishing US$5,397/FEU, an increase of 9% from December 25, which was twice that of the same period in 2019.
According to data from the Shanghai Shipping Exchange, in 2020 On December 25, 2020, the market freight rates (shipping and shipping surcharges) of Shanghai’s exports to the US West and US East basic ports were US$4,080/FEU and US$4,876/FEU respectively. Among them, the US West route increased by 4.6% compared with the previous week. .
Analysts at the Shanghai Shipping Exchange said that the average space utilization rate of ships on the routes from Shanghai Port to the West and East US routes has remained close to full load. However, the epidemic in the United States has hindered container turnover, and a large number of containers have been stranded at local terminals. Port congestion has been increasing day by day, and the shortage of containers has not been alleviated.
In addition, many shipping companies including CMA CGM, Hapag-Lloyd, Evergreen Marine, HMM, ONE, Yang Ming Shipping and ZIM It has been announced that starting from January 1, 2021, a comprehensive rate increase surcharge (GRI) ranging from US$1,000 to US$1,200/FEU will be charged on the trans-Pacific route.
But what is worth pondering is, is this freight rate the real freight rate? Some insiders said that the stable state of spot freight rates is actually an illusion. The prices you see are what you would pay for non-premium service, but there aren’t many shipping at that rate these days. You actually have to pay a big premium on top of that price. Some operators charge an additional fee of $1,500 or even $2,000 (per FEU) just to guarantee equipment and space. What’s the point of a $3,800 or $4,000 price if you don’t even have the space and equipment? Effectively, you pay $5,000 or $6,000 (per FEU) to get space. Otherwise you have to wait three or four weeks.
Industry insiders said: “Marine shipping demand is still soaring, and the resulting global equipment shortage has driven up freight rates on most major Asian routes this week. , and the upward pressure on demand seems to have slowed down.” Judah Levine speculated: “The most surprising thing is that the sudden jump in freight rates is the first significant increase in freight rates on these two trans-Pacific routes since mid-September. , which may indicate that the tacit agreement between shipping companies and relevant regulatory agencies not to increase freight rates on these routes may be coming to an end.”
The strength in spot freight rates has spread to next year Contract freight rates
Thanks to strict capacity control by shipping companies, the container shipping industry has achieved its highest profits in years. In 2021, the biggest question facing the container shipping industry is not whether it can maintain high spot freight rates, but whether this advantage will affect contract freight rates.
There are already signs that contract freight rates are rising. According to an assessment report by Sea-Intelligence, since September, consistently higher spot freight rates are increasing. Converted into contract freight rate. “As for 2021, overall contract freight levels are indeed likely to be significantly higher than in recent years, so whether the new crown epidemic is controlled or not, the 2020 epidemic will have a strong knock-on effect on 2021 contracts.” Sea-Intelligence said expressed in the analysis.
The United States is participating in the Trans-Pacific Transportation Services Negotiations Importers say their focus is on securing capacity and ensuring service reliability, rather than resisting price increases. In November, ZIM President and CEO Eli Glickman said freight rates “are going to be much higher than they were last year, and that’s the trend right now.” “Now, freight rate is not the issue; space is the issue. In order to get space, customers are willing to pay any price.”
But there are also different views, higher spot Freight rates do not guarantee higher contract rates. SCFI data shows that at the end of November, single TEU freight rates from Asia to Europe reached their highest level in 10 years. Hapag-Lloyd CEORolf Habben Jansen believes that the soaring Asia-Europe spot freight rates do not truly reflect the entire market, because more than half of the containers in these transactions are transported at much lower contract rates.
Shipping lines are encouraged that prospects for container volume growth in 2021 are stronger than planned capacity expansion. GTA Forecasting expects global container traffic to increase by 5.8% in 2021 compared with 2020. However, container shipping capacity will only grow by 2% to 3%.
High freight rates and shortage of containers will not recover until the second half of 2021
If shippers and logistics companies were hoping that ultra-high shipping container prices would come down in the new year, they may be disappointed.
Rolf Habben Jansen, CEO of shipping company Hapag-Lloyd, revealed at a press conference that the global logistics giant and container liner companies expect, including chaotic The situation, including market conditions, lack of berths and container shortages, will continue for some time in 2021.
In addition, Tim Scharwath, CEO of freight forwarding giant DHL Global Freight Forwarding, also attended the meeting. What the two CEOs have in common is an acknowledgment that 2020 will be characterized by tremendous unpredictability, including promises to customers about whether their shipments will arrive at their destination on time.
The two executives agreed that after the outbreak of the new crown pneumonia epidemic this spring, the very special environment led to a historic imbalance between supply and demand. They also believe that the container shipping market will not stabilize for the time being.
Scharwath said: “As for ocean freight, I think we have to get into the second half of 2021 before we see the market stabilize again. The first quarter will definitely still be affected by The impact will be the same in the second quarter.” “We will have to wait and see what happens because everything is difficult to predict. As a large company, we usually have a three to five-year plan. Right now, we are Make a 3-month plan.”
Ship Too little capacity and a shortage of containers are having serious consequences on the industry’s supply chain. In addition to broken trust with customers and record high freight rates, a recent survey by Sea-Intelligence revealed that only half of ships arrive at their destinations on time.
Until recently, shipping lines and container manufacturers expected that the current container shortage would be resolved after the Chinese New Year in February, which would allow the market to recover to a more normal state. But Habben Jansen no longer believes this prediction is correct.
“This year’s development has been beyond everyone’s expectations. Thanks to the introduction of economic stimulus measures, people still have money on hand and have spent most of it on On container cargo. There are many signs that the strong market we saw will appear after the Spring Festival and will continue into the second quarter.” Habben Jansen pointed out that the current congestion in the market will take some time to resolve.
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