Container shipping profits will drop by 80pc in 2023/24: HSBC report
After two years of unprecedented rises container freight rates were seen as having peaked with a downcycle in 2023 – 2024 driven by overcapacity. However, Parash Jain, Head of Shipping & Ports & Asia Transport Research for HSBC does not believe the sector will return to losses, which have so often characterised it over the last two decades pre-pandemic. “There are signs that spot rates could fall to pre-pandemic levels swiftly on the widening demand-supply gap (as seen in the BDI), but we maintain that contract rates should settle above their pre-pandemic levels and that capacity discipline will keep spot rates from lingering at trough levels,” Jain said.
Container shipping record $63.7bn q2 profits, no collapse imminent says report
The latest edition of the McCown Container Report takes the results of public-listed container lines in Q2, approximately two-thirds of capacity, and extrapolates these to the sector as a whole. The estimated figure of $63.7bn for Q2 is 123 percent higher than the $28.6bn recording in Q2 2021, and $5bn than the preceding quarter this year. It is the seventh straight quarter of record earnings for a sector a that for much of the previous two decades had struggled to even make a return on capital. With the profitability numbers continuing to rise John McCown, founder of Blue Alpha Capital, has upped his full year forecast for the sector to $245bn having started the year with $220.5bn estimate for full year earnings.
Container spot rates keep falling, but what will be the floor?
Drewry’s World Container Index (WCI) dropped 3 percent to $6,223.82 per feu for the week ended 18 August. This represents a 35 percent drop compared to the same week last year. On the key transpacific trade Shanghai – Los Angeles and Shanghai – Rotterdam dropped 5 percent each to $6,521 and $8,430 per feu respectively. Notably this week the Port of Los Angeles where congestion was the stuff of mainstream headlines a year ago was last week talking about have capacity for more services. Looking at Asia – Europe Rotterdam – Shanghai decreased 1 percent to $1,187 per feu. Rates into the US East Coast, where ports have seen more congestion, were higher though and New York – Rotterdam gained 1 percent to $1,298 per feu.
Major Chinese ports container volumes increase 5.3pc in mid-August
Export container volume slightly up 1.6 percent while the domestic volume increased 17.9 percent. Among which, the inland container volume of Shanghai increased 27 percent in mid-August. Cargo throughput at major coastal hub ports increased 4.8 percent while international trade cargo throughput dropped 0.5 percent. Crude oil shipments at major coastal ports declined 0.2 percent year-on-year. The port of Tianjin posted the highest rise in volume with a growth rate of 53 percent. Metal ore shipments at major Chinese ports increased 0.7 percent while the port inventory grew 22.69 percent. Due to a heatwave and lower than normal rainfall, shipping channels of Yangtze river were narrowing, negatively affected cargo transportation along Yangtze river. Cargo throughput at three major Yangtze River ports, Nanjing, Wuhan and Chongqing,declined 1.9 percent while the container volume increased 8.8 percent in mid-August.
Fundamental support for ultra-high container spot rates disappears
Container spot rates are starting to decline sharply from their highs and last week the Shanghai Containerized Freight Index (SCFI) dropped 9.7 percent week-on-week down 306.56 points to 2846.42 points on 2 September and is down 32 percent quarter-on-quarter. The SCFI stood at a record high of 5,051 points in January this year. The record high spot rates seen over the last 18 months have been driven by exceptionally high utilisation rates, very close to 100 percent, on the main deepsea trades, at which point Lars Jensen, CEO of Vespucci Maritime said the “pricing curve become almost vertical”. “This is the point where there is physically no more capacity at all whilst there is excess demand in the market. The data shows that it is at this point spot rates go to the historical highs we have seen over the past 18 months,” he said in report published by the Baltic Exchange.
Shanghai Port Northeast Asia empty container centre starts operations
Covering an area of 450,000 sq m, Shanghai Northeast Asia Empty Container Transportation Center has an annual handling capacity of 3m teu. Applying digital and intelligent management model, the empty container transportation center will provide integrated empty container services to clients from northeast Asia, Yangtze river delta and other regions along Yangtze river. Currently, Shanghai port is coordinating with major global container lines to improve empty container allocation and transportation capability and turnover efficiency at Shanghai port. During January and August, import empty container volume at Shanghai Port increased 8.7 percent year-on-year.
Container spot rates continue their downward March
Most recently, Drewry’s composite analysis of box spot rates on September 1 showed a 5 percent decrease for the week, the 27th consecutive weekly decline. Drewry’s index sits 43 percent lower than at the same point last year at $5,662 for a 40-foot box, 45 percent down on the September 2021 high but 55 percent above the five-year average. Xeneta looked at nine of its top 13 container trades and found one up by $3.5k per FEU and another down by $4.5k per feu. Mediterranean – US East Coast spot rates increased by $3,430, and North Europe – East Coast rates were up by $2,630 per feu since the end of August 2021, said Xeneta. Weighing down the sector, rates on the Asia – Europe trades have fallen $4,620 per feu, Asia – Med by $2,340 and Asia – US West Coast by $2,150, said Xeneta.