The sea freight dropped by 1/3? It’s time for “revenge”
Cargo owners ushered in the initiative to negotiate.
With the end of the most important maritime conference in the world – the Pan Pacific Maritime Meeting (TPM), the negotiation on the price of the long-term shipping industry association has also entered the right track. This is related to the price level of the global shipping market in the future, and also affects the transportation cost of global trade. Since the skyrocketing sea freight rate in 2021, the price of long-term contract agreements has risen. However, starting from the second half of 2022, the price of the long-term association continued to decline, and the shippers who had previously suffered high freight began to “retaliate” to reduce freight.
The long-term ocean freight dropped by 1/3, and some cargo owners chose to default
At present, the long-term agreement freight rates obtained by large shipping companies are about 1/3 lower than last year’s contracts. Shipping companies have made concessions to a certain extent when the price of the long-term agreement is higher than the spot freight, and there are many cases of termination of the contract or settlement by spot freight.
Shipping companies are greatly affected or start a price war
The long-term contract agreement is closely related to the revenue of the shipping company. Many shipping companies, including Maersk and COSCO Shipping Holdings, increased the proportion of long-term contracts in the overall business last year, even reaching 70% to 80%. Benefiting from this, even if the sea freight rate falls below the cost price in 2022, the performance of these shipping companies will still be strong.
Overcapacity, container freight rates will plummet
Several shipping industry consulting agencies predict that the industry will start a price war this year to attract new customers or retain existing customers. With a slew of newbuild mega-containerships starting to be delivered this year, liner operators could see shipping price wars again if consumption fails to keep up with capacity growth. As freight levels, freight volumes and port congestion returned to pre-epidemic levels, a total of 338 container ships (with a total capacity of about 1.48 million TEU) were idle in early February, far exceeding the level of 1.07 million containers in December last year. In the context of excess capacity, container freight rates are expected to plummet by at least 50%-60% in 2023.
Conclusion
In 2023, the international shipping market will be flat as a whole, and the “dividend” of the epidemic will end. The income of liner companies will drop sharply, and even losses will occur. Shipping companies will start to compete for the market, and the shipping market will continue to be depressed in the next five years.
