The Chinese export container transportation market has been continuously rising for three months since mid April this year, and then peaked and fell back in early July. Recently, multiple shipping companies, research institutions, and others have released predictions that the shipping sub market may show “differentiation” in the second half of this year, with uncertainty remaining the main theme of the market.
Steady downward adjustment
On July 27th, the Shanghai Shipping Exchange released the weekly report on China’s export container transportation market (July 26, 2024), stating that the overall market situation of China’s export container transportation market remained stable this week. However, due to differences in supply and demand fundamentals, the trend of different ocean routes showed differentiation, and the comprehensive index fell slightly. On July 26th, the Shanghai Shipping Exchange released the Shanghai Export Container Comprehensive Freight Index at 3447.87 points, a decrease of 2.7% from the previous period.
An international logistics company responsible for Shenzhen business also told Economic Observer that sea freight prices have shown an overall downward trend in recent times. He further explained that previously, due to factors such as rising tariffs in the United States and Brazil, many companies were “rushing to ship” their goods, especially some new energy vehicle companies that had to deliver their goods before July, which had caused a very tight sea freight market. The market is starting to decline now that everything needs to be released, but it won’t fall all at once, it will steadily decline, “said the business person.
The report from the Shanghai Shipping Exchange mentioned earlier shows that in terms of European routes, data released by S&P Global shows that the initial value of the Eurozone’s comprehensive PMI (Purchasing Managers’ Index, the same below) in July was 50.1, lower than the previous value and market expectations. The initial values of the manufacturing and service PMI both fell month on month, with the Eurozone’s manufacturing PMI in July hitting a seven month low, indicating that the recovery momentum of the Eurozone economy is continuously weakening, and the manufacturing industry has once again become the main source of weakness, which further dragged down the accelerated decline of the manufacturing labor force. In the future, China Europe trade will still face the test of policy uncertainty, and further attention needs to be paid to how it affects the export consolidation market. This week, the overall demand for European air routes remained stable, and spot market booking prices remained stable. On July 26th, the market freight rate (including sea freight and sea freight surcharges) for Shanghai Port’s exports to European basic ports was $4991/TEU (20 foot container, the same below), a slight decrease of 0.2% compared to the previous period. The market situation for the Mediterranean route is basically synchronized with that of the European route, and the supply and demand fundamentals are slightly weaker than those of the European route, resulting in a slight decline in market freight rates. On July 26th, the market freight rate for exports from Shanghai Port to Mediterranean basic ports was $5270/TEU, a decrease of 1.7% compared to the previous period.
In terms of North American routes, data released by S&P Global shows that the US Markit manufacturing PMI fell sharply to 49.5 in July, hitting a new low in seven months. Although the PMI of the service industry continues to maintain steady growth, the trend of the PMI of the manufacturing and service industries continues to diverge, indicating an imbalance in the economic recovery. In addition, the uncertainty brought about by the US presidential election is having a restraining effect on investment, and the outlook for the US economy in the second half of the year will be put to the test. This week, the growth of transportation demand has been weak, and the supply and demand fundamentals lack further support, leading to a continued decline in market freight rates. On July 26th, the market freight rates for exports from Shanghai Port to basic ports in the West and East of the United States were $6663/FEU (40 foot container, the same below) and $9557/FEU, respectively, a decrease of 6.5% and 2.0% from the previous period.
In terms of South American routes, there is a lack of further growth momentum in transportation demand, and the supply and demand fundamentals have weakened. This week, market freight rates continue to adjust. On July 26th, the market freight rate for exports from Shanghai Port to South American basic ports was 7939 US dollars/TEU, a decrease of 3.3% compared to the previous period.
In terms of Japanese air routes, the transportation market is generally stable, with a slight decrease in market freight rates. On July 26th, the freight rate index for Chinese exports to Japan was 768.92 points.
In addition, in terms of transportation demand on the Persian Gulf route, the supply and demand fundamentals are stable, and the spot market booking prices have slightly increased. On July 26th, the market freight rate for exports from Shanghai Port to basic ports in the Persian Gulf was $2219/TEU, an increase of 1.2% compared to the previous period.
In terms of the Australia New Zealand route, the local demand for various materials has shown an upward trend, and the supply and demand relationship is good. The market freight rates have rebounded after continuous adjustments. On July 26th, the market freight rate for exports from Shanghai Port to the basic port of Australia and New Zealand was $1482/TEU, an increase of 7.0% compared to the previous period.
Uncertainty
A reporter from Economic Observer Network found through reviewing previous data from the Shanghai Shipping Exchange that the current market trend has been rising since mid to late April this year. Compared with the same period last year, the current maritime market is still at a high level. Taking the North American route as an example, on July 28, 2023, the market freight rates for exports from Shanghai Port to basic ports in the West and East of the United States were $1943/FEU and $2853/FEU, respectively.
On July 26th, the Ningbo Shipping Exchange released a report on the outlook for the container shipping market in the second half of the year, stating that the second half of the year will generally usher in the seasonal peak season of the shipping market. In the second quarter of this year, the early shipment of some products combined with the rapid increase in freight rates led to an earlier peak season.
The report believes that current economic forecast indicators indicate that US import demand will continue to rebound, which is favorable for the North American shipping routes corresponding to the container shipping market. At the same time, the current freight rates on European and American routes have reached a relatively high level, but the improvement in economic demand on European and American routes may maintain a certain level of transportation demand in the second half of the year. Against the backdrop of a high probability of fluctuating freight rates, it is expected that the level after the decline will also be significantly higher than the same period last year.
On July 24th, the international logistics company C H. Robinson provided market forecast analysis to Economic Observer reporters, stating that so far in the second quarter of this year, sudden global events and high demand on various trade routes have led to a decrease in shipping capacity and an increase in freight rates. There is currently no sign of market stability, and it is expected that the volatility of the current market will not disappear in the short term. The company reminds shippers to be prepared for sustained fluctuations and to adopt effective strategic measures.
On July 18th, third-party research firm Clarkson reported on its outlook for the shipping market in the second half of this year, stating that global maritime trade volume has increased by 3% so far this year, with major commodity maritime trade maintaining growth. In the second half of the year, against the backdrop of further uncertainty in the global economic trend, increased geopolitical risks, decreased supply chain stability, and overall low growth rate of fleet supply, there may still be “differentiation” in the shipping segment market, with increased volatility in freight rates.
Clarkson believes that managing uncertainty will become the main theme of the market in the second half of this year.
Post time: Jul-29-2024