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Shipping companies have significantly increased freight rates, is there an undercurrent in the shipping market?

Recently, Maersk announced a significant increase in freight rates in an attempt to “reverse” the low freight rates on the Asia-Northern Europe route for several weeks.…

Recently, Maersk announced a significant increase in freight rates in an attempt to “reverse” the low freight rates on the Asia-Northern Europe route for several weeks.

Maersk announces increase in global FAK rates

Maersk, the world’s second largest shipping company, announced on March 3 that from July 31, the freight rate per box (20-foot container) from major ports in Asia to Rotterdam, the busiest container port in Northern Europe, will be increased to US$1,025-1,050. , the freight rate per large box (40-foot container) will be raised to US$1,900-1,950, an increase of more than 30% and 55% respectively.

Maersk has also raised its freight rates to Australia, and CMA CGM has followed suit by raising freight rates on the European route (Maersk and CMA CGM have successively announced increases in FAK rates from Asia to other parts of the world).

The current shipping price from Asia to Europe is about US$750 per box, and about US$1,200 per large box. According to analysis by the freight forwarding company, Maersk taking the lead in raising prices has two consequences:

The first type: other shipping companies are willing to follow immediately. The current freight rate is definitely losing money, and it will be whatever the increase is. It doesn’t matter if you shout, it is best if you succeed;

The second type: other shipping companies will wait and see for a week or even two weeks, and then follow up if they succeed, because currently all shipping spaces are not full, and they are afraid that if they follow, they will risk losing the goods to others.

The current cargo load situation is not very good, so it still depends on whether supply and demand issues have enough motivation to promote price increases, so it depends on the booking situation starting next week.

If the market is still sluggish at the end of July, the price increase strategy will definitely fail.

Freight forwarding companies believe that there should not be that big a chance of rising to the freight rates proposed by Maersk this year.

In fact, shipping companies are trying to increase freight rates every month. For example, American Line has reported plans to adjust freight rates by US$1,000 per large box almost every month.

The shipping company’s goal is to increase the freight rate as much as possible, trying to gradually push up the freight rate. Even if the price increase fails, or the market price is only one week, it can still avoid a rapid decline in freight rates. When you are lucky, you can encounter some special conditions in the market. Immediately increase freight rates significantly.

American Line Shipping Company’s Price Increase Strategy

This year, July 1st was the third time that the U.S. line increased. Many shipping companies and freight forwarders revealed that the current actual increase per 40-foot container from Asia to the U.S. West and East U.S. is about US$300 or US$400, which is not as expected. The current freight rate is only Return to the level of US$1,400-1,500 in the West and US$2,350-2,450 in the East.

According to industry insiders, shipping companies have issued three notices of price increases. In addition to calling for price increases in early July, they also announced price increases in mid-July and early August.

According to industry analysis, the cargo load of the U.S. line improved slightly in July, which was higher than that in May and June, but not as high as before the epidemic. As freight prices plummeted, small and medium-sized ships exited the market, shipping companies followed the trend and increased prices in July, which is considered The chance of success is slightly higher.

Freight rates drop in European market

Even though we have entered the peak season of the third quarter, cargo volume is still hovering at a low level, and freight rates have still dropped slightly, to about US$1,100-1,250 per 40-foot container, which is close to the cost line or below.

Therefore, it is considered difficult for Maersk to raise freight rates this time. Whether the booking volume will increase next week will be an observation indicator.

In addition, the industry is generally not optimistic. According to statistics from Linerlytica, an Asian container shipping platform, new container ship delivery capacity in June this year reached 277,873TEU, setting a record for new ship delivery capacity in a single month.

The total number of new ships delivered in the first six months of this year has reached 148, totaling 979,344TEU, and more than 1.2 million TEU will be delivered in the second half of this year.

The full-year delivery volume will reach 2.2 million TEU, which will also set a new annual delivery volume record, exceeding the 1.7 million TEU delivered in 2015.

The new high set in 2023 will be broken immediately in 2024.

According to Alphaliner statistics, 391 new ships with a capacity of nearly 3 million TEU will be delivered next year.

On the other hand, according to data from Linerlytica, only 47 ships were sent for scrapping in the first half of this year, with a total of 84,685TEU, far lower than the record 695,850TEU in 2016.

According to analysis by industry veterans, more and more ultra-large container ships (ULCVs) of more than 20,000 TEU are currently operating on the European route.

Since the port conditions in the United States are not as good as those in Europe, these ships cannot be put into the U.S. line. The ships with more than 20,000 TEU are new-build ships with very young ages and high construction costs. It is difficult for shipping companies to idle these ships.

Container ship orders have hit new highs in the past three years, with the current order volume being approximately 8 million TEU.

International shipping media The Loadstar analyzed that although Maersk’s sudden announcement of a freight rate increase is “shocking”, it may only be effective if shipping capacity is reduced.

At present, it seems that Mediterranean Shipping Company (MSC), which belongs to the 2M alliance with Maersk, is unlikely to agree to cancel any new ship flights.

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Author: clsrich