12 consecutive losses! BDI drops the most in 4 months, shipping companies prepare for “winter”
China Times (www.chinatimes.net.cn) reporter Zhang Zhi reports from Beijing
At the beginning of 2022, due to the high demand for shipping and the tight shipping capacity, it is “difficult to find a container”. However, this year, the supply and demand in the international shipping market have reversed, and international shipping prices have plummeted.
According to the data on May 26, the Baltic Dry Bulk Index fell by 3.54%, falling to 1172 points for 12 consecutive days, and the weekly decline was the largest in four months. The World Container Composite Index (WCI) recently released by Drewry, an international shipping data agency, shows that the current shipping price index has fallen to close to the level of 2019.
“Global economic downward pressure, weak overall demand, coupled with geopolitical conflicts, ocean freight rates are generally on the decline, and it is expected to continue to run at a low level in the future.” Kang Shuchun, chairman of China International Shipping Network Group Corporation, said in an interview. According to WTO forecasts, the outlook for global trade this year is poor, and the overall world economy is growing slowly. It is estimated that the growth rate of world trade in goods will be around 1.0% this year.
The combination of trade slowdown and overcapacity in the market may lead to continued decline in ocean freight rates in the next five years.
In the context of lower freight rates, the speed of international shipping is getting slower and slower. In the first quarter of this year, the shipping time from Europe to China was as long as 55 days. To make matters worse, entering May, due to severe drought, it greatly restricted the draft and capacity of ships. Cargo capacity, the Panama Canal announced the implementation of shipping restrictions, further slowing down international shipping.
China Merchants Futures pointed out that due to the recession of the global economy, it is expected that the shipping market will not have a big market this year. In the second half of the year, it will mainly depend on crude oil prices and whether the last Christmas stocking season in Europe and the United States can bring the final hope of a rebound in freight rates this year.
International shipping “falls and falls”
The Baltic International Maritime Council (BIMCO) has previously made statistics that the average speed of global container ships has dropped sharply. In the first quarter of this year, the average speed of global container ships has dropped to 13.8 knots, which is about 4% lower than the same period last year. Its chief analyst also predicts that the average speed of the global container fleet may drop by another 10% by 2025.
“The outlook for developed economies is not optimistic, because they are facing a lot of problems, the policy is erratic, and inflation is constant, so they have to tighten policies, which leads to the forecast value of developed economies this year at around 1.2%. The situation of developing countries may be good Some, but 2023 is not a year of high growth rate. We predict that emerging markets and developing economies will be around 4% this year, which is basically the same as last year, but growth in African countries and Latin American countries is low. Overall, this year The current world economic situation is not optimistic, and it is likely to fall into recession. These factors have led to unsatisfactory trade prospects this year.” Wang Xiaosong, a professor at the School of Economics at Renmin University of China, told the “China Times” reporter.
In his view, at present, export orders continue to decline, air transport conditions are weak, and container throughput is not satisfactory, slightly below the trend value. Judging from the throughput of the two important ports in the United States, the Port of Los Angeles and the Port of Long Beach, their throughput has been declining and is still lower than normal in previous years, so the demand for imports in the United States is not very ideal.
However, due to the “hard to find” containers in 2021-2022, shipowners have booked more container ships than before, and most of the orders will start to be delivered in 2023. It is expected that in 2023, the delivery volume will reach 2.34 million standard box. But at the same time, the demand is very weak. According to the forecast of the third-party agency Clarkson, the new capacity of the global container shipping market will reach 11.3% in 2023, while the demand growth is expected to be only 1.9%. Freight benchmarking platform Xeneta predicts that freight volumes may fall by 2.5% or more in 2023, resulting in idle volumes that could exceed 1 million TEUs by early 2023.
“With the further decline in freight rates, the freight rates of the US-West and European routes have fallen to the edge of the cost of most container shipping companies. In order to maintain freight rates during the period of low cargo volume, container shipping companies may still negotiate to reduce the buffer freight rate reduction for voyages. .” GF Futures Research Report shows.
Under multiple pressures, not only freight rates plummeted, but shipping stocks also declined.
On May 25, Hong Kong shipping stocks fell collectively. Orient Overseas International fell more than 7%, and COSCO Shipping Energy, COSCO Shipping Holdings, and China Merchants Port fell more than 2%.
Shipping speeds slow down
Poor demand and plummeting prices are just one of the problems facing the international shipping market.
In the context of falling shipping prices, ships passing through the Panama Canal will face higher shipping costs.
The Panama Canal and the vicinity of the lakes that feed it are understood to have received less than half of normal rainfall from February to April, the lowest levels in 20 years, according to Everstream Analytics. In previous years, the rainy season started before summer, and this year there is no sign of it.
As the drought worsened, the Panama Canal announced that starting May 24, neo-Panamax vessels (the largest vessels to pass through the waterway) will be allowed a maximum draft of 44.5 feet (13.56 meters), up from the previous limit of 45 feet; to On May 30, the draft ceiling will be lowered again to 44 feet.
This small adjustment may reduce the cargo on container ships by 40%. At present, at least four shipping companies have announced weight restrictions or imposed container fees of 300 to 500 US dollars per container from June 1. Some shippers will have to split heavier shipments into two containers, expecting an additional cost of $1,500 per container.
Whether it is to reduce loading or pay higher fees, it will have an impact on the cost of transporting goods, and goods may also face delays, which is tantamount to worsening the situation in the context of sluggish demand.
In the opinion of industry insiders, due to factors such as port congestion or temporary closure, labor shortage, and rising marine fuel prices, global shipping capacity is temporarily tense, which will temporarily push up freight rates, but it does not represent a trend of freight rates. At present, Maersk has warned in its financial report that due to the slowdown in global economic growth, the container market, which is the representative of global trade, is most likely to shrink. Corporate earnings are expected to remain weak for the rest of the year.
In general, although shipping prices have generally declined this year, the shipping speed has slowed down, drought and other factors still make this year’s shipping market full of uncertainties. Shipping companies, including Maersk, are already preparing for the “winter”.