From “a box is hard to find” to “ship looking for goods”! Crazy shipping scenery is no longer, a number of shipping companies share price cut, industry insiders said the prospect is light
In the past six months, global shipping prices have continued to fall since the high level, although still several times more than before the epidemic, but from the previous high point has fallen nearly half.
The financial reports released by many shipping companies show that the industry’s performance in the first six months is still generally bright. However, from the capital market point of view, the sector’s share prices are significantly lower than the previous high. China Taiwan’s two shipping giants Evergreen, Yang Ming shares fell more than fifty percent from the 52-week high.
Behind the decline of sea freight prices is the change of global capacity supply and demand situation. On the one hand, the port operation chaos has been eased, ship carrying efficiency; on the other hand, the impact of inflation, international trade is expected to weaken, compared with the decline in maritime prices, many foreign trade enterprises are more worried about “looking for orders”.
Looking ahead to the next two years, by the global economic recession is expected to aggravate, the new ship launch capacity increased sharply and other factors, many industry insiders are pessimistic about the trend of freight prices.
The overall decline in sea freight prices has lasted for more than half a year
Recall the 2021 shipping market “a box is difficult to find” of the madness, shipping agent businessman Ai still impressed.
“At that time, more than 20,000 U.S. dollars are normal, we came into contact with the highest 40,000, 50,000 U.S. dollars are there, the middlemen speculation is strong. But affected by the epidemic, the route is not much, the seller shipments and a large number of things can not be helped.” Ai lamented that now is no longer “cargo looking for ships”, but “ships looking for cargo”, the change in supply and demand led to a drop in freight prices.
2022 is already halfway through the year, shipping prices have experienced a rare sustained retracement. Reporters in a freight forwarding group to see, Shanghai to San Francisco 40 feet high container price as low as $ 6596, and the high point on 10,000 yuan is far from. A number of practitioners interviewed said that the market is most worried about the cargo volume, in the case of capacity to maintain a steady increase in the relative lack of cargo volume led to the downward adjustment of sea freight prices is obvious. Many container freight drivers also reflected that the market is somewhat cold and “it takes a lot of courage to invest in new vehicles”.
One Shipping founder and chief executive officer (CEO) Zhong Zhechao said in an interview with the Securities Times: “In the past six months, the global freight rate index recorded a continuous decline, such a long time, a significant decline in the industry is extremely rare. Take Shanghai to the U.S. West for example, from above $9,000 around the Spring Festival down to more than $7,000, and will soon reach the ‘6’ head.” In order to save the declining trend, many shipping companies cancel the ship class, but the effect is not very obvious.
Shanghai Shipping Exchange data show that on July 15, Shanghai export container integrated freight index of 4074.7 points, down more than 20% from the beginning of the year. Among them, Shanghai port exports to the U.S. West basic port market tariff (sea and sea surcharges) for 6883 U.S. dollars / FEU, April 15 price is 7860 U.S. dollars / FEU, a drop of more than 12% in three months.
A report released this month by Freightos, a global online freight booking platform, noted that Asia to the U.S. shipping prices fell more than 13% year-over-year at the end of the first half of the year, recording the first annual rate decline since the first half of 2020. In the second quarter, Asia to the U.S. West freight prices have fallen more than 50% from their highs.
On major routes, only transatlantic rates were higher than at the beginning of the year. The above-mentioned report points out that Europe to the U.S. East freight prices rose more than 42% year-on-year, which is about four times the pre-epidemic. Asia to Northern Europe prices are relatively stable since May, which is mainly limited by the deterioration of port congestion, but also nearly 30% lower than at the beginning of the year.
Shipping company results still bright but share prices retreat significantly
It is worth noting that the loosening of the towering freight rates in the first half of the year, but as it is still running at a high level, the shipping giants’ earnings forecasts are still bright.
Recently, a number of shipping companies released financial performance forecasts, performance generally maintained growth. COSCO Shipping expects to achieve a net profit of about 64.716 billion yuan in the first half of the year, an increase of about 74.45%; China Merchants Shipping expects to earn 2.74 billion yuan to 3.028 billion yuan in the first half of the year, an increase of 95% to 116%. In China Taiwan, Evergreen Marine’s cumulative first-half revenue reached NT$345.833 billion, up 82.09% year-on-year, the best performance ever; Yang Ming Marine’s first-half revenue reached NT$216.151 billion, up 59.4% year-on-year.
For the first half of the operating conditions, China Merchants Shipping said that the first half of the dry bulk and container shipping market has maintained a high level of prosperity despite the impact of factors such as the new crown epidemic, the war between Russia and Ukraine and the interest rate increase of the U.S. dollar. The company’s dry bulk fleet made accurate market judgment, reasonable layout and excellent operation, which led to a significant increase in profit contribution and outperformed the market index.
However, behind the earnings report, the shipping industry there is a decline in the volume of “hidden worries”, the shipping company’s share price is a sharp retreat from the high point. Hong Kong shares of OOCL International reported that the total revenue of the company rose 61% in the first half of the year, but the total cargo volume decreased by 7.4% compared with the same period last year; capacity decreased by 6.3%, the overall load factor decreased by 1.1% compared with the same period in 2021.
In the capital market, the reporter found that the share prices of listed shipping companies showed a downward trend for most of the last six months. Yang Ming Marine, Evergreen Marine fell compared to 52 weeks point has retracted more than 50%.
Terminal operation efficiency improved, the U.S. West port throughput rose
Halfway through July, the world’s major ports have been releasing first-half operating data.
In the country, although the epidemic emanated in the first half of the year, but some ports still achieved steady growth in container throughput. Among them, Shandong port cargo throughput in the first six months exceeded 800 million tons, up 6.2% year-on-year, and container throughput exceeded 18 million TEUs, up 8.4% year-on-year. And according to the data released by Yantian Port Group, in the first half of this year, the cumulative container throughput of Yantian Port Area completed 6.921 million TEUs, up 6.71% year-on-year.
Overseas, the U.S. Retail Federation and the Hackett Society released the Global Port Tracker Report, which shows that in May the monitored U.S. ports handled a total of 2.4 million TEUs of containers, up 6% sequentially and 2.7% year-on-year, a record since the data became available in 2002. The June figure is expected to be 2.25 million TEUs, up 4.8% year-over-year. The first-half total is expected to be 13.5 million TEUs, up 5.4 percent year-over-year.
Last week, the two western U.S. ports of Los Angeles and Long Beach also released first-half container throughput data. in June, container throughput at the Port of Long Beach reached 835,400 TEUs, up 15.3% year-over-year, surpassing the record figure of 83,000 TEUs in June 2018. Of the total, imports were 415,700 TEUs, up 16.4% year-over-year, while exports slipped 1.4% to 115,300 TEUs and the number of empty containers was 304,000 TEUs, up 21.6% year-over-year. In the first half of the year, container throughput at the Port of Long Beach reached 5.008 million TEUs, up 5.3 percent year-over-year; the number reached 2.547 million TEUs in the second quarter, surpassing the previous quarter’s record of 86,000 TEUs.
Gene Seroka, executive officer of the Port of Los Angeles, said that dockworkers’ operational efficiency has improved significantly, and the number of vessels waiting for shipment at the port has been reduced by 75 percent. Even with high inflation and elevated inventories, the company expects cargo volumes to remain strong in the second half of the year. Data show that the Port of Los Angeles container throughput reached 876,600 TEUs in June, breaking the port’s 115-year record for June data. In the first half of the year, the port operated 5.4 million TEUs, tying the record for the same period last year.
The Global Port Tracker expects container throughput at U.S. ports to decline year-over-year in the second half of the year due to a high base in the second half of 2021, but remain at historically high levels. In September, the volume was 2.12 million TEUs, down 0.8%; in October, it was 2.12 million TEUs, down 4.1%; in November, it was 2.06 million TEUs, down 2.5%.
Strikes by port chain workers in many countries are still in the shadow
It is worth noting that while the chaotic situation of terminal operations has eased, labor welfare negotiations in the terminal chain have been “cloudy” for a long time.
In June, an eight-day strike by South Korean truck workers sparked global concern and hit the domestic economy hard. On July 13, some drivers in the Los Angeles area announced a strike in protest of AB5, and some Oakland drivers plan to strike on Monday, echoing the protests of Los Angeles drivers.
It is reported that the AB5 bill requires the inclusion of temporary contract workers into the employer’s regular employed staff, which undoubtedly has a huge impact on many companies that rely on the odd-labor economy and even the California economy. For example, the cost of doing business (minimum wage, insurance, vacation, employee benefits, etc.) for such companies will further affect their employee management and pricing mechanisms; independent contractors will also lose their flexible working hours and be tied to the “9 to 5” work schedule. Many workers who support the bill say they are losing benefits because of their status.
Jonathan Gold, vice president of the American Retailers Association, said earlier that supply chain challenges will continue throughout the year, and it is critical that U.S. West Coast labor and management agree.
In Germany, a 48-hour strike by German dockworkers began last Thursday as wage negotiations with employers reached an impasse. 12,000 port workers’ strike paralyzed operations at major container hub ports such as Hamburg, Bremerhaven and Wilhelmshaven, the third and longest strike in an increasingly bitter wage dispute and the longest port strike in Germany in more than 40 years.
Founder Chen Zhen, a researcher at FCM Futures, believes that congestion at U.S. West ports rebounded as the number of China to U.S. West liners picked up sharply with the announcement of Shanghai’s unsealing on June 1, which concentrated arrivals in July. The announced strikes by drivers in Los Angeles and Oakland will affect the efficiency of supply chain operations and reduce the efficiency of vessel turnaround. And the German dockers’ strike will adversely affect the liner network and exacerbate the already long-standing supply chain congestion in the Nordic container hubs. However, with the ship turnover efficiency back down, for the continuous decline of the Asian and European markets can play a certain role in supporting the temporary.
The industry said the short-term support of freight prices, but the outlook is light
For the future trend of freight, a number of industry insiders said, because the third quarter is the peak of foreign trade shipments, freight index will be part of the support. But considering the global economic recession is expected to aggravate, as well as ship operation efficiency, new ships after the next two years to focus on launching, the shipping industry in the medium and long term high freight prices there are difficult to maintain the risk.
“The second half of August to October is the peak period of foreign trade market shipments, shipping market quotation may be overall better than the first half, but the rise should not be very big.” Chen Zhen spoke in an interview with the Securities Times, in the case of high inflation, the Federal Reserve tightened monetary policy, the European Central Bank is likely to follow, the European and American economies downward pressure, if the unemployment rate rises, the real disposable income of residents will fall, further affecting consumer confidence and demand, foreign trade freight volume is bound to reduce.
Maersk CEO Shi Soeren pointed out in June, after two years of mostly head market, the next few months may be a shrinking demand, increased supply of the long whip effect, the fastest possible reversal of the container boom in August.
In the long run, a more severe test also lies in the increase in the number of new ships launched. Shipping consultancy Drewry (Drewry) released this month 13 “container census and leasing annual review and forecast 2022/23” report pointed out that in 2021, the global container volume increased by 13% to nearly 50 million TEU, is the previous growth trend of three times, the current global container surplus is estimated to reach about 6 million TEU.
John Forsythe, head of container equipment research at Drewry, said that the momentum of global new ship deliveries remains strong, with slot capacity expected to grow by 3.6 million TEUs in 2023 and by more than 3.9 million TEUs in 2024.
“Earlier the market was perhaps overconfident about the industry.” According to Zhong Zhechao, shipping companies have proceeded to increase the suspension of shipping without the current launch of new ships, but with little success in stopping the decline in freight rates. If the next two to three years the new ship concentrated launch, the market added too much capacity, or will be the industry’s biggest test, the consequences can be imagined.
