Since this year, the container shipping market prices significantly stronger. 31 May, Shanghai export container freight index composite index reported 3044.77 points, compared with the previous week rose 12.63%, nearly a month of cumulative increase of more than 50%.
May is the traditional off-season for shipping, this year why the off-season? Freight prices rise on our economic impact geometry?
Demand growth capacity constraints
Container shipping market is highly internationalised, freight price fluctuations are mainly affected by market supply and demand. From the sea freight price trend in recent years, the price changes with the demand is very obvious, both increased demand led to a rapid rise in freight prices, there has also been a demand downturn freight prices lower.
‘This year's maritime market off-season is not slow, mainly because of economic recovery, transport demand to enhance.’ Ning Tao, director of the Economic Policy and Development Strategy Research Centre of the Institute of Water Transport Science under the Ministry of Transport, said.
From a worldwide perspective, trade growth has been driven by a moderate recovery in the global economy. Among the major economies, the eurozone GDP grew 0.3 per cent in the first quarter, ending the negative growth trend since the second half of last year, the highest quarterly growth rate in nearly two years. The United States economy continued its expansionary trend in the first quarter, growing by 1.6 per cent. Led by consumption and investment, the U.S. economy entered the inventory replenishment phase from the fourth quarter of 2023, with total inventories and total imports maintaining sustained growth momentum. The Organisation for Economic Co-operation and Development recently raised the world economic growth forecast for this year from 2.9 per cent in the previous period to 3.1 per cent; the International Monetary Fund expects the global economic growth rate for this year to be 3.2 per cent, up 0.1 percentage point from the forecast in January this year.
China's foreign trade situation exceeded expectations. In the first four months of this year, the total value of import and export of trade in goods was 13.81 trillion yuan, an increase of 5.7 per cent year-on-year, the scale of which hit a record high during the same period in history. Driven by exports, China's port international line container throughput from 2023 to date to maintain a steady growth trend, the first four months of this year, a year-on-year increase of 10.3 per cent, accelerated growth from the fourth quarter of last year, led to the recovery of international container shipping market demand.
‘At present, the recovery in transport demand covers almost all current mainstream routes.’ Ning Tao said, from China's port sub-route international line container throughput growth, in addition to the Middle East and Africa route container growth has slowed down, other routes have appeared to varying degrees of acceleration, especially the United States, Australia and other routes to reverse the negative growth trend in 2023.
Demand increases, freight rates naturally rise. in May, Maersk, Duffy, Hapag-Lloyd and other head shipping companies have disclosed route tariff increase information, price increases covering Asia to Europe, North America, Australia, South America and other directions of the route.
Multiple factors widen the gap
At present, although not to the traditional peak season, but because of the European route transport cycle becomes longer, part of the owner of the production and commercial activities out of the continuity and stability considerations, a certain amount of advance procurement. At the same time, Europe and the United States transport demand recovery, accelerate the growth of cargo volume. In addition, China's export trade in the rapid development of emerging industries, such as new energy vehicles, photovoltaic and other products, superimposed on the tariffs in some areas of the emerging industries to adjust, so that the owner of the shipment is eager to ship, the short-term demand for transport fluctuations in the larger.
The growth rate of transport volume was higher than the growth rate of transport capacity, and there was a capacity gap. In the first four months, the main liner companies in the market in China to North America, Europe, South America and the Persian Gulf four routes cumulative put more than 8.3 million TEU (TEU) space, up 14.7% over the same period last year, the completion of the volume of more than 7.9 million TEU, up 19.4% over the same period last year.
At the same time, the rapid change of the situation in the Red Sea, international shipping companies choose to avoid the Red Sea waters, Asia-Europe route container liners around the Cape of Good Hope. The longer voyage resulted in a loss of about 20 per cent of the original capacity. In order to maintain liner services, liner companies supplemented the capacity gap by putting in new ships, leasing ships, drawing ships from other routes, etc. However, there is still a certain degree of shortfall in capacity in the short term, which also aggravated the tightness of capacity on other routes.
Container turnover efficiency decreased, and empty containers at ports accelerated depletion. in April, Hongjing-Container New Container Inventory Index stood at 143.34, a drop of 18.43 points compared with the previous period, indicating that the inventory of new container containers declined, and the capacity was affected to a certain extent.
In addition, bypassing the direct increase in fuel costs and fixed expenditures, insurance costs and other costs have also increased significantly, the Asia-Europe route booking prices rose significantly, which in turn drove the other trunk routes tariffs have also risen significantly.
Is expected to gradually return to normal
As the world's largest country in the trade in goods, shipping prices will rise on China's foreign trade and what impact? This round of rise will continue to when? And how to respond?
In the shipping market, container shipping prices are divided into long term contracts and spot prices, shipping price fluctuations affect mainly spot market prices, and mainly spot inside the use of export CIF (CIF) contract owners, and does not involve the signing of long term contracts and the use of export FOB (Free On Board) contract owners. After years of efforts, the proportion of long term contracts between ships and cargoes has improved, so price fluctuations on China's import and export freight rates have limited impact.
At present, the impact of rising freight rates on trade is global, and our situation is relatively good. For example, the same Far East - Europe and the United States route, China route prices lower than Japan, South Korea, Southeast Asia and other neighbouring countries and regions. ‘According to the research visits to liner companies, China's neighbouring countries such as Japan and South Korea to Europe and the United States market tariffs synchronous adjustment, COSCO Shipping Group's Japan and South Korea - Europe and the United States routes offer slightly higher than the Chinese market level of 50 U.S. dollars / TEU.’ Ning Tao said.
Li Muyuan, executive vice president of China Container Industry Association, said that in the long run, the increase in freight rates offset the profits of China's exports to the European market, and raised the cost of procurement of Chinese goods. To cope with the instability of shipping services, retailers in Europe need to raise inventories to ensure supply, raising inventory costs. The stable functioning of manufacturing supply chains has also been significantly affected.
Rapidly rising sea freight prices and increased transit times due to detours have diverted some seaborne goods to other logistics corridors. Some goods with tight delivery time and high value were shifted to air transport, or ‘sea + air transport’ was chosen. Part of the goods to China-European liner, China-European liner booking volume growth.
Ning Tao said that the container fleet continues to expand rapidly this year. It is expected that after the completion of the annual delivery, the global container fleet capacity will exceed 30 million TEU, an increase of about 9%. A report released by the World Trade Organisation in April predicted that the volume of global trade in goods would grow by 2.6% this year. In the long term, with the Red Sea crisis brought about by the bypass on the industry-wide spillover effect gradually normalised, the market gradually on the bypass to invest in new capacity, capacity will continue to be in excess of demand.
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