Tuyere financial reporter Shi Bingbing
Freight rates have risen sharply again, still in the traditional off-season, and have reached a nearly two-year high.
According to the latest report of The LoadStar, a well-known British logistics media, recently, a British freight forwarder issued a warning to customers, saying that the demand for shipping in Asia and Europe began to show a similar trend to the peak of the epidemic. According to a customer of Container xChange (xChange Germany), "Although inventory levels are not putting significant pressure on warehouses, container prices continue to climb and are adjusted approximately every 48 hours. ”
In the interview process of Fengkou Finance, many people used "rare" to describe the current shipping market, and unexpected market conditions such as explosion of cabins, container dumping, and soaring freight rates emerged in the traditional off-season in May. Some industry insiders told reporters that they did not expect such a big fluctuation in the market after the May Day holiday this year, and the speed and pace of this change are indeed a bit like the momentum of two years ago.
The validity period of the sea freight quotation is reduced to 48 hours?
The factors affecting the shipping market are complex, and the Red Sea crisis has not only not been alleviated over the past few months, but has become more severe and complex. The expectation of rising shipping prices is still strong, and CMA CGM, Hapag-Lloyd, Maersk, etc. are successively carrying out the second round of freight rate increases in May, mainly involving routes such as Europe, the Mediterranean, Africa, and South America.
CMA CGM announced that it will adjust the uniform rate from Asia to Northern Europe (the "FAK rate") from May 15, 2024 (loading date), and the new FAK rate will be increased to $2,700 for a 20-foot small container and $5,000 for a 40-foot large container. Compared with the previous freight rates implemented on May 1, they were increased by $500 and $1,000 respectively.
Hapag-Lloyd announced that from May 15, 2024, the FAK rate between the Far East and Northern Europe and the Mediterranean will be raised, and from May 16, 2024, the peak season surcharge ("PSS") will be imposed in many places in Africa, ranging from $250 to $600.
Maersk issued a notice that PSS will be levied from the Far East to the west coast of South America, Central America and the Caribbean. Among them, a 20-foot dry container is $1,000, and a 40-foot and 45-foot dry container is $2,000. Maersk has also adjusted the PSS levy on certain routes from Far East Asia to the east coast of South America, effective from May 1 to May 31, 2024.
According to the reports of foreign media such as The LoadStar, as well as the data of Container xChange, the price of containers in mainland China is experiencing huge fluctuations, and the rates are changing rapidly in just a few days. Some foreign traders said that container prices continue to rise, adjusting about every 48 hours.
A Hapag-Lloyd container ship on November 20, 2023. Image source: Xinhua News Agency
Is this really the case in the market? In the interview, a number of freight forwarders told reporters that the freight rate of the shipping company is generally updated once a week, and the so-called 48-hour adjustment is mainly related to the rise of the surcharge, but the speed and pace of the current freight rate change is indeed frequent.
"I didn't expect the market to fluctuate so much after the May Day holiday this year, and when I was still surprised by the freight rate of more than $6,000 on Africa, South America, the Caribbean and European routes, it has exceeded $7,000 in a blink of an eye." Mr. Chen, the head of a freight forwarding company in Qingdao, said that as the rate levels of contracts and spot began to diverge, long-term contract rates are far from short-term rates, and shipping companies are increasingly prioritizing and loading cargo with higher revenues, and capacity is also being shifted to more profitable routes.
Why did the South American route soar?
In this wave of price increases in the global shipping market, the price increase momentum of European routes and South American routes is the most obvious, and freight rates have climbed to a high point in the past two years.
The Red Sea conflict disrupted shipping, and the European line bore the brunt of it. Since the end of last year, the world's major shipping companies have avoided the Red Sea and detoured to the Cape of Good Hope in Africa to avoid Houthi attacks, which has greatly increased the cost and transit time of sea freight. With the Red Sea danger zone expanding, Maersk recently said it expects container capacity between Asia and Europe to be reduced by as much as 20% in the second quarter.
At the same time, the freight rate of the South American route is also soaring, Shanghai freight forwarder Ms. Lu told reporters, "At present, the South American route has a price without space, especially the South American East route, the freight rate has broken through the $10,000 mark, and the increase is basically around $1,000." ”
Why did the South American route soar? "The main reason for the price increase in South America is that Brazil will impose import tariffs on China's new energy vehicles, and plans to gradually increase the tariffs over three years, and many car companies are shipping in large quantities. In addition, the U.S. election announced that 50%-60% tariffs will be imposed on China in the future, causing some Chinese companies to increase investment in South America, driving up the price of South American routes. Industry insiders analyzed to reporters.
In the context of the general rise in freight rates from Asia to South America, major shipping companies have strengthened the route layout from China to Mexico, and Maersk, CMA CGM, COSCO Shipping, etc. have successively opened China-Mexico routes to meet the growing market demand.
Ships moored in the Gulf of Suez, Egypt, waiting to pass through the Suez Canal. Xinhua News Agency data map
COSCO and its subsidiary, OOCL, launched the Transpacific Latin America 5 (TLP5) route on May 6, providing fast shipping services between China, South Korea and Mexico with a transit time of between 15 and 20 days.
In response, CMA CGM has added a route connecting China, South Korea and Japan and Mexico to its transpacific route, calling at the ports of Tianjin (Xingang), Qingdao, Busan, Ensenada, Manzanillo, Lázaro Cardenas and Yokohama. The maiden voyage was completed on May 11 by the "ANL Wangaratta" from the port of Busan, South Korea, and the route will be put into operation by eight 4,200 TEU container ships within 56 days.
It is understood that the rate from the Far East to Mexico has now reached the highest level since September 2022, supported by the fact that Mexico's demand for imported goods from China increased by more than 33% year-on-year in the first quarter of 2024. Tan Hua Joo, an analyst at Linerlytica, noted that the rate increase on the China-Mexico route is happening against the backdrop of a general increase in freight rates on the Asia-South America route, which has prompted carriers to shift more capacity to the route.
How does the freight forwarder and shipper accept the recruitment?
On the one hand, the head shipping company is like a snowflake to the market price increase announcement, on the other hand, the shippers are unwilling to accept the price increase, which makes the freight forwarders who are caught in it sigh, "The shipping company's freight rate changes too fast, and I don't know how to quote customers recently." ”
"In the face of this rare wave of off-season price increases, shippers have only two choices, either to accept the price increase and ship as planned, or to continue to wait and see. However, judging from the current situation, not only is it difficult to book space, but the freight rate will rise sharply in June. Mr. Chen told reporters that he still has five or six orders of goods sent to Africa, almost 20 containers, but the freight has risen to nearly 9,000 US dollars, and he still can't grab a space.
There is also a freight forwarder said, "Sometimes the space that is hard to get is just a foot in the door, either you can't grab the cabinet, or you are notified that the booking is canceled, and there will always be various emergencies." ”
Before the Red Sea crisis, the industry generally believed that the container shipping industry would face tens of billions of dollars in losses in 2024, but under the influence of multiple factors, the freight rates of all routes rose and the momentum continued unabated. On May 10, CMA CGM's official website announced that from June 1 (loading date), the new FAK rate from Asia to Northern Europe will be raised again, $3,200 per 20-foot container, and $6,000 for 40-foot containers including high cube containers and reefers, until further notice.
CMA CGM raises FAK rates from Asia to Northern Europe. (Picture from CMA CGM official website)
In addition to the continuous escalation of geopolitical events, the strategic adjustment of shipowners in order to increase the bargaining chips for future route signing, the general rise in international fuel prices, and the rising demand for replenishment of inventory in European and American countries have provided the shipping company with the confidence to raise prices, but this round of price increases has brought a lot of shock to the market.
Industry insiders told reporters that the shipping giants that have touched the "ceiling" of freight rates during the 2021-2022 period are tacitly huddled together and seized the opportunity to increase prices, and shipping companies are reducing capacity in order to maintain freight rates. At present, the market is scrambling for containers and space, and ETA (estimated arrival time) is also unstable.