Due to the epidemic, shipowners have stopped sailing and insured prices in a commercial manner first, and the demand in the U.S. market has surged. Various subjective and objective factors have caused the current extreme imbalance of resource supply and demand in the entire global supply chain system to be adjusted, and prices across the board have increased. Prices per box are hard to come by, on-time delivery is even more of a luxury, delays are the norm, and the risk of customer disconnection continues to increase.
Supply side
The current global container shipping capacity is about 24 million TEU, and the corresponding container equipment scale is 44 million TEU. The ratio between the two is about 1:1.83. Normally, it is in a tight balance and can only meet the basic requirements. of normal circulation. Under the current situation, for example, it used to take only 30 days to circulate, but now it may take 60 days. Due to global congestion and imbalance of flow, the temporary gap in containers can reach several million TEU. The global monthly container production capacity of 300,000 TEU will be fully loaded until after the Spring Festival next year.
For the shipping company, there are two simple and crude options. At present, it is biased towards the latter. It is commercially reasonable. I will not comment on whether it is reasonable. What do you think?
the reduction of profits.
Suspension of investment in new ships and new equipment may further disrupt the supply chain and lose customer service levels for customers, waiting to maintain a tight balance between the return of container ships and equipment and demand, returns It is sustained high profitability.
So today Drewry starts with a soulful question, why may container shipping companies not want the market to return to normal?
In Maersk CEO Søren Skou’s investor conference call, I excerpted two latest statements:
Once again stated that he does not intend to order ultra-large ships , and to a certain extent they may order ships to replace old/aging ships that will also be in the range of 10,000-15.000TEU, not within the Triple-E size (18,000TEU), which is the following class.
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Søren said that as long as they have not seen clearly what industry regulation will pursue for future fuels, they believe there are significant technical risks in ordering new ships.
Therefore, if other shipping companies have the same idea as Maersk, the world’s largest shipping company, it seems that the industry will continue to develop on a cyclical path of “up cycle”, with relatively limited capacity growth in the next few years.
Søren also mentioned Maersk’s current relationship with freight forwarders. Maersk said the dispute with DB Schenker did not make Maersk worried that the company was losing the support of large freight forwarders.
“As in any other business, you win some customers every day, and you lose some customers. That’s the way it is,”
“As in any other business, you win some customers every day, and you lose some customers. Lose some customers. That’s it.”
Maersk currently gets 45% of its freight volume from freight forwarders, with the remaining 55% coming from cargo owners. “The CEO said that this share has remained stable over the past five years and has not changed since the introduction of Maersk SPOT.”
Recalling the push the day before yesterday, 80% of SPOT is currently booked by freight forwarders, and the rest is direct freight consignment people, the entire share has reached 53%.
Demand side
I mainly track the North American market, because the United States is the main support point for this wave of demand and price increases, and further grasp the main line If we follow the two traditional import purchasing giants Walmart and Target, the demand in other markets such as Europe is actually less than last year or the same. Shipping companies are currently continuing to push up 1,000 and 2,000 USD on the European line. Personally, I think it is relatively fictitious and I believe it will not last too long. The second epidemic is also fermenting the nationwide lockdown, which is mainly maintained by the control of shipping schedules and the shortage of equipment. Southeast Asia’s freight rates this week also show a trend of loosening and turning points in some ports from north to south, except for South China, which is still rising sharply. However, the demand situation in North America is still very strong, so the current mainstream view is that this wave will last at least until the Spring Festival next year.
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However, the forecasts for demand in North America are not small, because the volume of U.S. container imports and the number of confirmed cases, hospitalizations, and deaths continue to hit new highs.
In October, the Port of Long Beach handled a total of 806,603 TEUs, setting a monthly record. The Port of Los Angeles handled 980,729 TEU in October, a year-over-year increase of 27% and a record high. Los Angeles is expected to reach 900,000 TEU in November, up 23% year-on-year. According to the report, imported containers at the top ten U.S. ports increased by 18.8% year-on-year in October
At the same time, according to the latest report from the New York Times, COVID cases in the United States have surged by 77% in the past 14 days, and the number of deaths in the same period has increased by 77%.It’s up 52%, and the country just set a new single-day hospitalization record.
The risk for customer container shipping is that consumption of U.S. goods will decline due to non-service business restrictions and/or declining consumer confidence. A large number of boxes of goods are already on their way. The initial estimate for the Port of Los Angeles in December is 835,000 TEU, a year-on-year increase of 12%, after which a rebound is expected before the Spring Festival in January.
Here’s the question: What if the intensification of the secondary epidemic in winter cuts consumer demand in the middle of the ordering cycle, and importers have too much inventory in 2021?
S&P Global Market Intelligence’s supply chain research unit recently stated that container shipping may have borrowed future demand, warning on Thursday Beijing time that the risk of “retail inventory balloons” was rising.
According to tracking demand and inventory at Walmart and Target, store W’s same-store sales are 7% higher than each store’s inventory, while store T’s same-store sales are 7% higher than each store’s inventory. Store inventories are 11% higher. What’s happening now is a constant need for restocking. They only purchase to achieve break-even sales throughput and avoid the loss of sales revenue caused by out-of-stock products.
Of course, there is always the risk of declining sales. But if you’re a supply chain manager for one of these retailers and currently same-store sales are up 5%, 10%, 15%, you should also be more concerned about running out of stock. Same-store consumption is increasing, but inventory is declining, so this must be corrected immediately.
Regarding the vaccine, the likely scenario is that sometime in 2021, when a vaccine becomes available, you will see incredible pent-up demand release and then fall back to a A new balance. You’ve already seen the same thing on a larger scale starting in May and June in the United States when the initial restrictions began to be relaxed in May and June.
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