Cause Of High But Unsustainable Global Container Shipping Charges

Cause Of High But Unsustainable Global Container Shipping Charges

Following the trend in 2020, shipping lines are expected to continue to have a good year in 2021. In the short term, container charges in the markets will remain high. However, due to the sensitivity of price fluctuations as well as the ability of the industry to recover the economy, medium-term freight rates are expected to be difficult to keep at current high levels.

During the pandemic, changes in consumer spending habits fueled a recovery in commerce, an increased tendency to order online, especially for personal protective goods, while spending spending on services such as entertainment and restaurants decreased. This trend accelerated further in the second half of 2020, when commodity demand recovered. According to Statistics, the total volume transported from Asia to North America by sea in 2020 is expected to exceed 2019, 7%, while the total volume transported by Asia - Europe routes is expected to decrease by about 5%.

On the other hand, the global container imbalance has worsened, as container shortages have spread across Asian markets, while ports in Europe, or the US have serious congestion. . The above reasons have pushed up empty container rates, especially on the routes from China to Europe and the United States. Freightos Baltic Index data shows that the cost of transporting a 40-foot container from China to Europe or the US West Coast is now more than $ 8,000 and $ 4,000, while rates for a year ago were $ 2,000.



Container shortages and port congestion due to pandemic-related interruptions have extended the turnaround time of container ships and increased freight rates. It is predicted that the Lunar New Year holiday period could ease container scarcity. However, epidemics broke out in some parts of China, making many people unable to return home, so factories maintained production levels, while the demand for goods still increased strongly in the country. European market. This causes the spot container rates to be higher than normal, affecting prices in short-term pre-booked contracts.



In the early pandemic period, the situation of serious overproduction capacity has radically promoted the M&A trend of shipping lines through mergers and acquisitions and alliances. In particular, the three largest alliances have a market share of 85% of US-China routes, up 60% from seven years ago.

Operational efficiency of shipping lines has improved in 2020 due to the increase in freight rates in the second half of 20 years despite the decrease in cargo volume compared to the same period last year and careful capacity deployment during the period. The most stringent closing time is expected in Q2 20. The industry performance in 2021 is expected to remain good and the performance of each container shipping company will vary depending on the ability to combine the route, contract volume and fleet charter rate, and any other costs for Container inventories.



Despite the high prices during the pandemic, empty container prices are seen as unsustainable due to stiff competition in the industry and the recovery of the supply chain. In addition, the industry still faces the risk of geopolitical tensions, trade protectionism as well as uncertainty in the economic recovery path of different regions and regulations. other IMO emissions determinations.

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