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Insight | Time: Sep 15 2021 10:03AM
Container marine market: ports on the verge of collapse
 
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Global container marine market saw continuously surging freight in 2021. According to related data, the freight rate of one standard container exceeded US$20,000 from China/Southeast Asia to the East Coast of North America, which was $16,000 on Aug 2. The cost of one 40ft container from Asia to Europe was near $20,000, which was 10 times of that one year ago. Peak-season demand for the Christmas and the congestion of ports were major reasons for recording high sea freight. In addition, some shipping companies took insurance fee to ensure the delivery within several weeks and importers were bidding up price to scratch containers, which also affected price. 

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Source: Shanghai Shipping Exchange 


According to the data from Shanghai Shipping Exchange, the Shanghai containerized freight index was at 4568.16 on Sep 10.

European route

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Source: Shanghai Shipping Exchange


The COVID-19 pandemic continued spreading across the Europe and consumers鈥 demand for various materials was high. Transportation demand was stable on the market. The ports were still seriously congested in Europe. The average utilization rate of seats at Shanghai port was around 100%. On Sep 10, the freight rate from Shanghai to basic ports in Europe was at $7,491/TEU. 


As for the Mediterranean route, the average utilization rate of seats at Shanghai port was around 100%. On Sep 10, the freight rate from Shanghai to basic ports in Mediterranean was at $7,365/TEU.

North America route

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Source: Shanghai Shipping Exchange


Impacted by intensified spread of the Delta Variant, the daily new infections remained above 100,000 in US. Demand for various materials like pandemic prevention ones sustained high. The stagnated of containers, unsmooth transportation and the congestion at ports did not change. The average utilization rate of seats in W/C America Service and E/C America Service was still near 100% at Shanghai port. The sea freight kept high.


With soaring demand and the earlier stocks hoarding of some retailors for the Christmas, the ongoing congestion at State of California kept challenging Los Angeles and Long Beach ports. 


According to the latest data from the signal of the Port of Los Angeles on Sep 14, the number of container ships waiting for berths at the Southern California Anchorage reached 22, the number of ships waiting outside the port was at 16, and the number of ships waiting approached 38. The average waiting time has increased to 8.5 days from 8.1 days a week ago, with the longest waiting time up to 16 days. Such "congestion" has led to a shortage of goods, logistics delays and rising prices in many placesIncreasing freight volume each time and the resulting extension of stay at ports finally led to the backlog of container ships waiting for free berths. The import volumes on the week 39 tends to continue increasing. It means the congestion may be hard to ease temporarily. 

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In addition, in Europe and the United States, a shortage of truck drivers means that once containers arrive at destinations, it will become more difficult. The COVID-19 pandemic led to the closure of the port, further aggravating traffic jams. The shortage of truck drivers in the UK was particularly acute, in part because EU workers left the UK after Brexit and due to the pandemic. Coupled with tax changes, drivers coming from other regions of Europe faced higher working cost or employment cost for working in the UK.

 

Recently, some large companies even decided to purchase their own container and charter independently to cope with shortage, including Walmart and the Home Depot from US and IKEA from Sweden. An Ikea spokesman confirmed that the company had bought more containers and chartered ships to address product shortages. "We have also transported goods from China to Europe by train and have invested in temporary turnover warehouses in China, Vietnam, India, Indonesia and Thailand to support production," she said.


Looking at the shipping companies, they are expected to achieve record high profit in 2021 and the performance of 9 big shipping enterprises in the first half of 2021 was as following: 

Company Operating income Net profit  Remark 
Maersk US$26.6 billion US$6.5 billion The profit for the whole year is expected to exceed that of the past seven years combined
CMA CGM US$22.48 billion US$5.55 billion A 29-fold increase over the same period of last year
Cosco  139.3 billion yuan (US$21.54 billion) 37.098 billion yuan (US$5.74 billion) Nearly 32 times compared with the same period last year
Hapag Lloyd US$10.6 billion US$3.3 billion A year-on-year increase of more than 9.5 times. 
HMM US$4.56 billion US$310 million A loss of about $32.05 million in the same period last year. 
Evergreen Shipping US$6.83 billion  US$2.81 billion An increase of more than 27 times compared with the same period last year
Wanhai Lines NT$86.633 billion (US$3.11 billion) NT$33.687 billion (US$1.21 billion) An 18-fold increase over the same period last year. 
Yangming Marine NT$135.55 billion (US$4.87 billion) NT$59.05 billion (US$2.12 billion) An increase of more than 32 times over the same period last year
ZIM Integrated Shipping US$4.13 billion US$1.48 billion Nearly 113 times compared with the same period last year


However, shipping companies also faced some problems. CMA CGM made the decision to stop all spot rate increases from Sep 9. Hapag-Lloyd from Europe joined CMA CGM in freezing spot rates and it thought the container market may calm down from its recent frenzy of price rises. Maersk preferred to sign long-term contract with customers. Meanwhile, the ONE from Japan said it would maintain its pricing policy.

Current pressure has caused dilemma on the market. For example, some empty boxes were seriously congested at some ports, while container was very short in some other ports. The spread of pandemic continued and there were some extreme weather like typhoon, further exerting negative effect on the market. 

[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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