Source: shipping transaction Bulletin
In 2023, China's export container freight index (CCFI) fell by about 60% compared with the same period last year, and the performance of listed container transportation companies could not escape the downward trend.BorderbreakIn the first quarter of 2024, the "double River crisis" absorbed transport capacity, and shipowners were given a respite, but it has not yet been fully realized in the first quarterly report.
In 2023, with little interference from the epidemic, the performance of the collection market returned to its supply and demand fundamentals-excess capacity. In this context, freight rates have fallen for almost a whole year, and the performance of collection and transportation enterprises can not escape the downward trend. The China Export Container Freight Index (CCFI) compiled by the Shanghai Shipping Exchange includes the Container Shipping Association and the spot market price, which is often used to judge the income of the collection and transportation enterprises. In 2023, CCFI fell by about 60% compared with the same period last year, and the operating income of the major listed companies of Container also roughly dropped by 60%. The decline in net profit was even greater, generally at 80% to 90%.
However, since the end of 2023, Houthi forces in Yemen have attacked merchant ships on the Suez Canal. As a result, most liner companies have made a detour around the Cape of good Hope, superimposing the drought of the Panama Canal-the "double River crisis" absorbs capacity, and the market feels "unable to get boxes." shipowners have found that the supply and demand fundamentals of excess capacity have quietly reversed, and the "good days" during the epidemic seem to be repeating. Of course, this has not yet been widely reflected in the first-quarter results of the collection and transportation enterprises.
Looking to the future, "estimating freight rates is already an art", some people in the industry so lament the uncertainty of the future.
Income halved in 2023
In 2023, the CCFI Composite Index and the European, American-Western, Eastern-American, Southeast Asian and Polish Red Route Index are 937 respectively.Borderbreak.29 points, 1150.48 points, 735.75 points, 936.4 points, 623.17 points and 1043.32 points, down 66.43%, 74.19%, 65.51%, 63.02%, 58.62% and 62.21% respectively over the same period last year.
Freight rates in 2023 are determined by the fundamentals of supply and demand.
In terms of demand, according to the Maersk Annual report, global and regional cargo volumes fell mainly in 2023. Of this total, imports from North America fell by 10% from a year earlier, while those from Europe fell by 8% from a year earlier (see Table 1).
In terms of supply, taking into account container ship orders, delivery and disassembly, container ship capacity in 2023 is about 8.22% year-on-year growth, with a total capacity of more than 27.7 million TEU. By the end of March 2024, the capacity of container ships was 6239 and 28.549 million TEU. Forecasts show that container ship capacity will break through the 30 million TEU mark in 2024.
Demand fell while supply increased. In the most difficult time, shipowners even "reduced" to the point of cost. This is also in line with the law of history, CITIC Construction Investment Futures Shipping analyst Chen Yuhao found that in the long cycle before the epidemic, the absolute value of freight was on the low side, resulting in a relatively limited profit margin itself, and the relative level of freight itself could not be directly cashed into profit, but was dominated by cost (see figure 1).
Once it comes to the stage of cost-sharing, the advantages of large enterprises will be revealed, because their fuel and capital costs are difficult for small and medium-sized enterprises to reach. Therefore, some people in the industry told the Shipping Trade Bulletin: "the top five liner companies usually have long-term stability, and after the top seven, they are in danger of being eliminated."
To sum up, in 2023, under the overall situation of excess capacity, even if the volume of collection and transportation enterprises did not decline significantly-Maersk's annual volume fell by only 0.2% compared with the same period last year (see Table 2). However, it is reasonable for operating income to fall by 40% to 50% and net profit to fall by 80% to 90% year-on-year (see Table 3).
Affected by this, container shipping listed companies in this year's port shipping companies in the list of income and net profit ranking has also declined. For example, 2609.TW dropped 6 places in the revenue list and 18 places in the net profit list, while 2615.TW dropped 8 places in the revenue list and 65 places in the net profit list, with a loss of 1.336 billion yuan at the bottom.
"Shuanghe crisis" reverses the general trend of excess transport capacity
Since the end of 2023, Houthi attacks on merchant ships in Yemen have affected the passage of the Suez Canal, superimposed drought restrictions on the Panama Canal, and a variety of reasons are absorbing part of the gathering capacity. In terms of European routes, Linerlytica released data show that the overall capacity of the far East-Nordic route increased by 22.7 per cent in April compared with 2023, but the actual booking capacity decreased by about 3 per cent compared with the same period in 2023.
At the same time, with the emergence of factors such as the increase in the expectation of active inventory replenishment in the United States, the cargo volume of the major liner companies also improved in the first quarter (see tables 2 and 4).
In the "double river crisis" to absorb capacity and cargo volume improved, shipowners were able to get the same respite as during the epidemic under the overall situation of excess capacity.
An employee of a freight forwarder told the Shipping Trade Bulletin: "now there is a sense of not getting space." Unlike during the epidemic, freight forwarders are now unable to get shipping space. "during and after the epidemic, shipowners began to attach importance to the development of direct passengers."
The strength and willingness of shipowners who put large amounts of cash in their pockets to build a digital supply chain during the outbreak are not to be underestimated. Through the cabin e-commerce platform, shipowners have acquired the ability to let direct passengers find themselves and "rob" part of the forwarder cake through end-to-end services. "the competition in the container transportation industry has turned to the comprehensive competition of products, resources and capacity. In particular, the two major tracks of digital supply chain and green low-carbon development have become the focus of the industry and the direction of development. " Cosco Marine Control confessed in its annual report.
In terms of freight, from 2024 to the end of April, the CCFI Composite Index and the European, Western, Eastern, Southeast Asian and Red Route Index were 1265.16 points, 1915.39 points, 965.39 points, 1132.48 points, 714.25 points and 1432.19 points respectively, with year-on-year increases of 20.25%, 41.53%, 26.78%, 3.14%, 9.30% and 34.00%, respectively.
However, the increase in freight rates has not yet been fully realized in the quarterly report of the collection and transportation enterprises (see Table 3). There may be two reasons: one is that the Linerlytica believes that the financial report reflects the lag of income; the other is that the brokerage believes that there is more implementation of the lower price long-term association.
Two Taiwanese container shipping companies that have released their quarterly reports have performed well. Wanhai Shipping revealed that in the first quarter, the company achieved performance growth due to the growth of Asian regional routes, with net profit of US$142 million, a significant turnaround into profit (a loss of US$65 million in the same period last year); its operating income increased by 8% year-on-year to US$852 million, a year-on-year increase of 21% in February (see Table 3).
China is a certainty in an uncertain world
How long the breathing space currently available to shipowners will last depends on uncontrollable factors such as geopolitics. Therefore, a freight forwarder lamented: "Predicting freight rates is now an art."
But in such an uncertain world, China's exports can break through various obstacles and become a decisive factor. The Maersk Annual Report shows that despite trade shifts, China's share of global exports has remained stable at about 1/3, with little change over the past decade. Data shows that the market share in 2017-2019 and 2021-2022 shows a downward trend, but both in 2020-2021 and 2022-2023 show an upward trend. The export market share in 2023 is close to 34.5%, higher than 2019 before the epidemic. About 32%. China has successfully expanded its market share in South America, Central and East Africa, and the Eastern Mediterranean despite challenging macroeconomic and market prospects in these regions (see Figure 3).
At a time when global cargo volumes are declining overall, COSCO Haikong stated in its 2023 annual report that it continues to exert efforts in a steady manner in Latin America, Africa, Southeast Asia, the Middle East and other regions, with precise layout, and its ability to serve global trade has been steadily improved. During the reporting period, the Europe-South America East Route and several regional comprehensive economic partnership (RCEP) member countries routes were successively opened, the Far East-Africa Route was upgraded, and multiple feeder services such as Kenya-Mozambique and Mediterranean-North Africa were launched; at the same time, it also accelerated the construction of the Chankai Terminal in Peru and signed a partial equity purchase agreement for the Sukona Terminal in Egypt, which continued to effectively transform the opportunities for rapid growth in emerging markets and regional markets into new drivers of its own high-quality development. In 2023, COSCO's vehicle exports, lithium batteries, photovoltaics, and cross-border e-commerce freight volume will increase by 146%, 56%, 24% and 75% respectively, and the supply structure will be further optimized.
In addition, during the restructuring process of the Container Shipping Alliance, the cooperation between the Ocean Alliance, where COSCO Maritime Control is located, has been stable and orderly. On February 27, 2024, the Ocean Alliance announced that it would extend the cooperation period by at least 5 years to 2032, and will release Day8 in mid-March. Route products fully demonstrate the Ocean Alliance's long-standing partnership and its firm determination to provide supply chain support and guarantee to the global industrial chain.
"At a time when we can't get boxes from other shipping companies, we can still see COSCO boxes on the market." A freight forwarder said.