The strong current freight rate has affected the contract freight rate next year
It is estimated that in 2021 global container traffic will increase by 5.8%, but capacity will only increase by 2% to 3%.
Thanks to the strict capacity control of shipping companies, the container shipping industry has achieved the highest profit for many years. In 2021, the biggest problem facing the container shipping industry is not whether it can maintain a high spot freight rate, but whether this advantage will affect the contract freight rate.
There are already signs that contract freight rates are increasing. According to an assessment report by Sea-Intelligence, since September, the continuously high spot freight rates are being converted into contract freight rates. “As far as 2021 is concerned, the overall contract freight level may indeed be much higher than in recent years. Therefore, regardless of whether the new crown is under control, the 2020 epidemic will have a strong knock-on effect on the 2021 contract.” Sea-Intelligence in Expressed in the analysis.
U.S. importers who are participating in negotiations on trans-Pacific transportation services said that their focus is on ensuring capacity and ensuring service reliability, rather than resisting price increases. In November, Eli Glickman, ZIM's president and chief executive officer, stated that shipping rates "will be much higher than last year, which is the current trend." "Right now, freight is not a problem; space is the problem. In order to obtain space, customers are willing to pay any price."
But there are also different opinions. Higher spot freight rates do not guarantee higher contract freight rates. SCFI data shows that at the end of November, a single TEU freight from Asia to Europe reached the highest level in 10 years. Hapag-Lloyd CEO Rolf Habben Jansen believes that the soaring Asia-Europe spot freight rates cannot truly reflect the entire market, because more than half of the containers in these transactions are shipped at much lower contract rates.
Nevertheless, higher spot freight rates have contributed a lot to the shipping companies' profits this year. Drewry raised its forecast for 2020 container shipping operating profit by 16% in October to reach US$11 billion, a level not seen in ten years. According to data from sea intelligence, 11 shipping companies publicly released earnings reports showing that their earnings before interest and taxes (EBIT) in the third quarter were all positive, and 9 of them had substantial year-on-year growth in revenue.
It is encouraging to shipping companies that the prospects for growth in container traffic in 2021 are stronger than planned capacity expansion. GTA Forecasting predicts that global container traffic in 2021 will increase by 5.8% compared to 2020. However, container capacity will only grow by 2% to 3%.
GTA forecast stated in its latest "World Economic and Trade Trends" report: "Looking ahead, we expect that the global compound growth rate (CAGR) will reach 4.1% in the medium term (2021-25), and in the long term (2021-30) ) Will reach 3.4%.