Shipping companies warn: The peak season is coming early and the battle for containers intensifies

Sunny Worldwide LogisticsIt is a logistics company with more than 20 years of transportation experience, specializing in Europe, the United States, Canada, Southeast Asia, Australia and other markets. It is more of a cargo owner than a cargo owner~

Xie Fulong, general manager of Wanhai Shipping, said at a press conference after the release of first-quarter results that as Europe and the United States entered the inventory replenishment period in April and May, container transportation demand increased significantly, resulting in congestion at some terminals. In addition, in order to reduce the impact of rising freight rates, customers choose to ship goods in advance, causing the peak season to start in May. In the context of tight shipping space, freight rates have increased accordingly.

Xie Fulong further pointed out that if the current transportation pressure cannot be solved in the short term, freight rates will continue to receive support, and high freight rates may continue into the next season. Taking the Shanghai Container Shipping Index (SCFI) as an example, the average value in the first quarter of 2024 was 2010 points. Although it fell back to 1940 points before the May Day holiday, as shipments resumed after the holiday, the SCFI index rose to 2010 points on May 10. 2306 points, and jumped to 2520.76 points on the 17th, a 30% increase in just 20 days.

He emphasized that the peak season of the European container shipping market this year has been moved forward from the traditional July to May. This is mainly because the Red Sea crisis caused ships to divert. As of May 14, global idle shipping capacity was only about 190,000 TEU (20-foot standard containers), accounting for only 0.7% of the total fleet capacity.

Xie Fulong also talked about what he called the "container wars," noting that this is a recurring equipment shortage since the epidemic. While previous reports indicated that large container manufacturers had no availability until August, Xie Fulong said that since then, container orders have increased. He said that against the backdrop of ship shortages, the container war has broken out, and orders for new containers have increased significantly. Currently, orders from major container manufacturers have been scheduled until November, which will help support freight levels in the third quarter.

In the first quarter of 2024, Wanhai Shipping's revenue increased by 8% year-on-year to US3.8 million, and it achieved a net profit of US4.6 million, successfully reversing the net loss of US.4 million in the first quarter of 2023. At the same time, shipping container traffic in the quarter also increased by 23% year-on-year to 4.48 million TEUs, demonstrating strong consumer demand.

Xie Fulong also mentioned that due to the diversion of ships on the European route caused by tensions in the Red Sea, shipping companies had to deploy more transport capacity, which led to a gap in transport capacity on other routes, which in turn drove up the freight rates on sub-route. Not only the freight rates on European and American lines have increased, but the freight rates on offshore lines and other routes have also been affected.

Xie Fulong emphasized that the current supply of ships is very tight, and coupled with the impact of the Red Sea crisis on the supply chain, there is no solution in the short term. He said that currently, ships from Asia to the East Coast of the United States, Asia to Northern Europe and Asia to the Mediterranean are all detouring around the Cape of Good Hope. Previously, a route from Asia to Europe required 12 ships to maintain regular sailings; now it requires 15 ships.

He further noted that the situation has spread to other routes. In addition to the sharp increase in freight rates on the four major routes, freight rates from Asia to Australia, New Zealand, West Africa, South Africa, South America and Southeast Asia have also been pushed up. Wanhai Shipping's Asia-South America service accounts for 15% of its total revenue, and containers are currently difficult to find.