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Insight | Time: May 16 2022 9:35AM  Editor:Tina Kong
Container marine market: demand largely softening
 
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In April 2022, the Ningbo Containerized Freight Index, NCFI of the Maritime Silk Road Index (www.msri.cn) released by Ningbo Shipping Exchange (www.nbse.net.cn) averaged 3427.6 points, down 6.8% from the previous month and up 46.2% from the same period last year. Of the 21 routes, the freight index of 16 routes fell. Among the major ports along the "Maritime Silk Road", the freight index of 12 ports fell. After the May Day holiday (Apr 30-May 4), the freight index slightly increased.

 

According to the latest data collected by CCFGroup, the freight from major China ports to Bangladesh/Chittagong was at US$5,700/40HQ, that to Egypt/SOK was near US$6,300/40HQ, that to Indonesia/Jakarta was at US$2,500/40HQ, and that to Pakistan/Karachi was around US$4,300/40HQ.

 

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European route: The recovery of economy faces various risks in Europe. Shipment volume was largely stable. Some liner companies slightly revised down price to attract orders. 

 


North America route: The daily new infections of COVID-19 sustained high. Recent economic development was in stagnation. The inflation has been at its highest level since the financial crisis, and the US economy may fall into stagflation in the future. The sail schedule was intensive recently in E/C America service, with slightly falling freight. The W/C America service saw stable freight.

 

Shipping alliances to cancel more Asian flights due to falling ocean volume

In the coming weeks, the three major shipping alliances are preparing to cancel more than 1/3 Asian flights in response to the decline in export shipments, according to the latest report from Project44.

 

At the same time, delivery times from Asia to North Europe continued to increase due to a decline in export volumes and the resulting cancellation of flights, with delivery times from China to Northern Europe and the UK increasing by 20% and 27% respectively in the past 12 months, according to Project44.


Hapag-Lloyd holds gloomy expectation toward performance after Q2 amid softening demand


The net profit of Hapag-Lloyd in the first quarter of 2022 hiked to $4.68 billion, 3 times more than $1.45 billion in the same period of last year, while the CFO of it expressed that current demand is softening. Its CFO expected that the performance of Q2 may remain strong while holds gloomy outlook thereafter.


The CFO expressed that even if the congestion sustains current level or new congestion appears, while judging from the current overall situation, demand is weakening. He said the demand from North America keeps strong while that from Europe falls. The spot ocean rates are anticipated to greatly decrease in Q3, even lower than the price under contractual basis periodically. Different regions may see various appearances, while the overall trend is similar. The global spot ocean rates are losing ground.

 

Hapag-Lloyd's freight volume was flat at 2.987 million TEU in the first quarter of 2022, with revenue of $9 billion, up 82% from a year earlier, with an average freight rate of $2,774/ TEU. By comparison, Maersk's average freight rate was $2,276/TEU, while another alliance partner, ONE, had an average freight rate of $2,973/TEU.

 

Shanghai's lockdown makes export scarce


As for the port congestion, according to Project44, the retention time of imported containers in Shanghai reached a peak of nearly 16 days at the end of April, while the retention time of export containers remained "relatively stable, about 3 days". It explained: "the excessive retention of imported containers was due to a shortage of truck drivers who were unable to transport unloaded containers. Similarly, the sharp decline in the volume of inbound exports meant a reduction in the number of containers shipped from Shanghai, thus reducing the retention time of export containers.

 

Shanghai warehouse business has been partially restored, Ningbo warehouse was in normal operation. But the drivers from other provinces were required to show the health code.

 

The ongoing lockdown in Shanghai continued to make exports scarce, while the spread of pandemic has welcome easing time. Meanwhile, COVID case counts climbed in Beijing and other cities raising the possibility of additional lockdowns. 

 

Problems that Chinese exporters encounter


The exchange rate of RMB against USD kept depreciating recently. The effect caused by the currency change is complicated. Generally speaking, the depreciation of RMB will be bullish for exporters as they can exchange more RMB after obtained USD during settlement. Although the devaluation of RMB can improve profit space to a certain extent, the operation of enterprises is complex and cannot be generalized. In long run, volatile exchange rate change within a short period may add uncertainty to the future orders in contrast.

 

Actually, small exporters face two more tricky problems now: reducing orders and ascending cost.

 

Reflected by one exporter in Ningbo, he started witnessing decreasing orders after the Spring Festival holiday, namely Feb and Mar, and the reduction was especially more apparent in Apr : with decrement at least at 20%. He said panic procurement of overseas customers and surging ocean freight were the major reasons for hot export business in 2021.

 

Higher cost was mainly attributed to increasing raw material prices and advancing logistics cost. With rising oil price and energy price since last year, the cost of many raw materials climbed up. The periodically logistics restrictions amid the pandemic also resulted into many extra costs.


The spread of COVID-19 pandemic remains a big uncertainty. The continued lull in ocean volumes will be a chance for destination ports to clear some existing backlogs. But if the  lockdown lasts long,  the coming surge of containers will become concern for those already-congested ports.

[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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