The sky-high freight rates, and the hot availability of space and empty containers, are forcing freight forwarding logistics companies to charter ships and open shipping routes.
Last week, it was reported on Souhang.com that freight forwarding giant DSV Panalpina bypassed the shipping company and leased three ships and a batch of empty containers to open a new China-Denmark route. The latest news is that another freight logistics company giant DHL Global Forwarding also Is considering stepping in.
Dominique von Orelli, executive vice president of DHL Global Forwarding, confirmed to the media that the company is evaluating charter plans.
DHL considers chartering for customers
A large freight forwarding company considered direct control of ship assets, but actually entered an industry that is different from its core business in terms of operation and culture. On the other hand, it also shows how popular it is to ship containers from Asia to Europe and North America. And freight forwarders desperately provide customers with adequate services.
"There may be more freight forwarders to follow suit ." Anil Vitarana, former president of United Arab Shipping, said in a post on LinkedIn.
"If there is a continuing shortage of ship capacity and containers, and major logistics providers and 3PL find it feasible to use internal resources to integrate the economic benefits of the entire supply chain, shipping companies may regret the beginning of this trend." Vitarana wrote.
He added that the logistics provider/third-party logistics provider (3PL) team includes former executives of the shipping company and can help his current employer provide the services provided by the shipping company.
Vitarana also stated that shipping companies can also cooperate with 3PL to improve service capabilities. He pointed out that CMA CGM acquired CEVA Logistics in 2019 and Maersk included DAMCO in its integrator strategy, which has further promoted the supply chain solutions of shipping companies. Program.
But not all freight forwarders consider it necessary to provide shipping services to customers.
Two other large freight forwarders, Kuehne + Nagel and DB Schenker, said that although the container market is extremely tight, they do not think such a move is necessary.
Freight forwarding giant Kuehne + Nagel expressed confidence in products based on digital solutions and cooperative relationships with shipping companies, able to provide services to customers, and will continue to provide leasing services for project cargo, rather than container customers.
DB Schenker does not believe that chartering is one of the solutions for capacity. The current shortage of ships and chartering costs have also increased. Alphaliner, a maritime analysis agency, pointed out in mid-November that most ship charters are tight. The daily charter price of 3,000-3,500 TEU ships is US$18,000, an increase of US$2,000 from the end of October.
Thorsten Meincke, DB Schenker's board member responsible for air and ocean freight, said that the resources needed to charter and manage ships are often underestimated, which will distract attention from the reliable and robust services provided by freight forwarders.
"Once you have ship assets, you have to fill them up. This will become your focus, rather than providing customers with the best solutions," Meincke said. "The current challenge facing the maritime market is largely the shortage of containers, not just the space of ships."
Indeed, other sources also believe that despite Maersk’s efforts to redefine its business model by integrating traditional shipping and freight functions, there are still huge differences in operations and culture between freight forwarders and shipping companies.
Ship asset owners must keep their ships full and require functions and costs such as ship planning and container repositioning, and freight forwarders usually rarely consider these daily affairs.
In addition, the source said that the shipping capacity chartered by DSV is small, and its cost is far from competitive with ships of 20,000 TEU or more that travel between Asia and Europe. This is why freight forwarding and shipping are almost always in different organizations, even in larger shipping companies.
Businesses that engage in international transport most likely prefer freight forwarding, but it is also an applicable method of transport even for personal use. The freight forwarding companies facilitate the shipment of goods to the destinations by using various carriers such as road freight, air freight, railway freight, and ocean freight.
If you don’t have any idea about freight shipping, you’ll find freight forwarding intimidating. Thus, if you engage in a business that involves international transport, it makes sense to understand the facts about freight forwarding.
WHAT ARE FREIGHT FORWARDING FIRMS?
Transporting goods from its origin to another destination is one of the services of freight forwarding firms. The freight forwarder works as a middleman between the transportation services and the shipper. They are responsible for arranging the entire process including the storage and the shipment of the goods. Likewise, they also negotiate the cost of the transport and choose the most reliable, fastest, and economical route.
SERVICES OFFERED BY FREIGHT FORWARDERS
Hiring the services of freight forwarding companies is advantageous to your business. They can help you in transporting the goods to your customers. As they are knowledgeable and expert about shipping of goods, they ensure that the merchandise will be delivered on time and in good condition.
Some of the services that freight forwarders offer are the following:
Customs clearance
Insurance
Packing
International import and export documentation
Inventory management and
Storage
Through the services of freight forwarders, the entire process of importing and exporting of goods becomes less stressful. They can also assist you in the packing of goods, thus reducing the pressure from you.
CHOOSE A RELIABLE FREIGHT FORWARDING COMPANIES
If you’re thinking to hire a freight forwarder, make sure to choose well-established and reliable freight forwarding companies. This gives you the assurance that they have strong experience about the business and good network of contacts. Likewise, experienced freight forwarders can deal and solve any issues about the transport of your goods efficiently and quickly.
As you’ll entrust your goods or merchandise to a freight forwarder, it makes sense to work with them harmoniously. It’s not enough to seek the service of a company that you can rely on and trust, but also with outstanding customer service. This way, you’ll have peace of mind that your shipment will arrive on time and safely.
Before entrusting your goods to freight forwarding firms, make sure that all the documents for transporting the goods are completed.
After a further surge last week, the spot freight rate for containers from Asia to Northern Europe is now 130% higher than the beginning of the year, up 200% year-on-year. The Far East-Europe trade route is still under tremendous pressure, and the freight rate will continue to rise further.
In the current peak season, the influx of imported goods from Asia into the United States does not seem to have eased. Los Angeles and Long Beach are still in a state of collapse and paralysis. There are as many as 20 ships lining up near the west coast, waiting for the empty space in LA Long Beach Port to unload.
Australian ports remain congested, with more than 75,000 teu stranded in Sydney.
Freight rates in the Asian intra-route market remained stable, but from the same period last year, freight rates across Southeast Asia have increased by a staggering 390.5%.
Europe-to-land route : The North European spot freight rate of the Shanghai Container Freight Index (SCFI) just released by the Shanghai Shipping Exchange increased by 13.5% to US$2,374 per TEU, and the Mediterranean freight rate increased by US$165 to US$2384, spot The freight rate increased by 7.4%. It is worth noting that the year-on-year growth rate in Northern Europe was 196.8%, and the year-on-year growth rate in the Mediterranean was 209.2%. But in fact, the market freight rate is much higher than this.
A Shanghai-based non-vessel carrier said that several shipping companies are currently offering more than US$6,000/40-foot container to Rotterdam and more than US$8,000/40-foot container to the UK.
A freight forwarder in China stated that the carriers on this route are now purely focused on maximizing freight revenue, regardless of all other agreements. He said: "Shipping companies only give priority to higher-priced spaces-whoever pays more will get the space."
Christoph Baumeister, senior trade manager for Flexport Asia/ISC-Europe, said the situation for Asian shippers was “worse than week after week”. He added: "The Far East-Northern Europe/Southern Europe trade route is still under tremendous pressure, and freight rates will rise further this week."
Moreover, according to data from the freight benchmark company Xeneta, the current average price of short-term market contracts in Asia and Europe of three months or less is 200% higher than a year ago, at $4,831 per 40 feet.
Although Xeneta’s long-term contract freight data showed an increase of 28% to US$1,648 per 40 feet, it pointed out that despite the peak contract season, few deals have been concluded because shippers and carriers think it’s not the time.
In the trans-Pacific region , the spot freight rate remained basically unchanged last week and stabilized at a record level. According to SCFI data, the spot price on the west coast of the United States rose by US$68 to US$3947 per 40 feet, while the port price on the east coast fell by US$8. To $4,700 per 40 feet. The year-on-year growth rates of the West Coast and East Coast of the United States were 161.6% and 78.2%, respectively.
Since mid-September, due to the intervention of Chinese regulatory agencies, the spot market on this route has remained stable, and shipping companies hope to obtain guaranteed income from their premiums.
As the influx of merchandise imports from Asia into the United States during the peak season did not seem to ease, the Port of Los Angeles data confirmed that the port's imports in the 50th and 51st weeks increased by 37% and 54% year-on-year respectively.
The continued growth of imports has put tremendous pressure on the San Pedro Bay ports in Los Angeles and Long Beach. Freightos Chief Marketing Officer Eytan Buchman said: "There are reports that as many as 20 ships are lining up near the west coast, waiting for the unloading of empty spaces in the Port of Long Beach, LA. Retailers are eager to put these goods on the shelves before the holidays."
As for Australia and New Zealand routes , with the gradual improvement of the epidemic situation and the continuous growth of transportation demand during the traditional peak season, the market freight rate has increased. According to the SCFI index, the freight rate (sea freight and ocean freight surcharge) for exports from Shanghai to the basic port of Australia and New Zealand was US$2490/TEU, up 2.5% from the previous period. But the Australian shipping business is currently in a "state that has never been so bad."
The continued "chaos" in the Australian container supply chain will mean that some retailers' shelves will be empty during Christmas.
The impact of supply chain delays caused by the Maritime Union of Australia (MUA) strike in early October continues. The shipping company stated that the disruption of shipping schedules caused a backlog of "8 to 10 weeks" delays (8 weeks of delay means that retailers will not have inventory "until January of next year"), but the union denies that this is the reason. Rather, it points to the increase in demand during the peak season.
According to the Freight and Trade Alliance (F&TA), trade imbalances, resulting in a large surplus of empty containers and lack of storage areas for storing these containers, are still the main problems hindering the supply chain. F&TA Director Paul Zalai said: “Currently, it is estimated that the imbalance of containers is 75,000 teu, which is stranded in Sydney’s empty container yard and operator’s warehouse. The surplus of empty containers will cause Sydney’s logistics to fall from the current congestion state to an unsolvable situation. deadlock."
The peak season demand has increased the spot freight rate from China to Melbourne to US$2490, compared with US$1648 in mid-October. Paul Zalai believes that the country’s shipping industry has “never seen such a bad situation.” He explained: “Our ports are congested, services are limited, freight prices are at record highs, detention, congestion and terminal access surcharges continue to increase. "At the same time, similar shipping delays have also affected importers in the Tasman region. Due to the chain reaction caused by port congestion in Australia, the Port of Auckland in New Zealand experienced delays this year.
The market freight rates of intra-Asia routes also remained stable last week, but from the same period last year, freight rates across Southeast Asia have increased by an astonishing 390.5%.
Although these are eye-catching figures, it is important not to forget that 65% to 75% of all goods are transported on the basis of contract freight rates rather than spot market freight rates. However, due to the exhaustion of the number of contracts (many contracts are in unexpected periods when consumer demand is out of control) the rest tends to the spot freight market. When contract negotiations restart next year, the strong bull market will also benefit shipping companies.
Andy Lane of CTI Consulting in Singapore commented: “There is still one month before the new Asian-European contract. This is under the background of record-breaking spot freight rates. Prices may rise sharply, which will have a real impact on the market."
Recently, container freight has soared! The number of empty ships in the market has drastically reduced. In order to preserve space, container shipping companies have started to "grab ships" in the leasing market.
Under such circumstances, Mediterranean Shipping MSC, the world's second-largest container shipping company, even started the direct ship purchase model and purchased two container ships again. It is worth mentioning that this is the 11th ship purchased by the company in a short period of time.
Alphaliner said that the large container ships currently available are insufficient, and most shipping companies have set new records for daily rent. It is particularly noteworthy that even the classic Panamax vessel of 4,000-5,300 TEU, which has suffered "years of suffering", has now risen to an incredible level, which was unimaginable a few months ago.
Driven by strong market demand, container shipping companies have begun to find ways to mobilize all available container ships.
Industry insiders pointed out that the global container shipping market is reappearing in the situation of "a ship is hard to find and a box is hard to find". The mainstream shipping companies have booked space until late December, and it is predicted that high freight rates will continue until around the Spring Festival. High freight rates and high volumes will drive the explosive growth of shipping companies in the fourth quarter.
The "biggest" title changes hands?
Recently, MSC has successively sold and purchased multiple container ships. It is imaginative: Is the title of the world's largest container shipping company changing?
In addition to the two new container ships purchased by MSC as mentioned above, MSC also recently purchased another larger 5,642 TEU Panamax container ship Granville Bridge (built in 2006) from Japanese owner Doun Kisen. ), and neither party has announced the selling price.
It is worth mentioning that the sister ship of Granville Bridge, Greenville Bridge, was also sold by Doun Kisen to MSC earlier this month, with a disclosed price of US$14 million.
At the same time as Greenville Bridge, MSC also purchased another 2510TEU feeder container vessel named Bomar Hermes.
At the end of last month, MSC also spent US$158 million to purchase six large container ships of 7,500-8500TEU from the German shipowner company.
Among them, MSC paid US$114 million for 4 ships of 8,200TEU-8,500TEU. These 4 ships were 8,200TEU ER Tianping and R Tianshan and 8,500TEU ER Tokyo and ER Texas. The above 4 ships Both were built in 2006.
And the 7,849TEU ER Vancouver built in 2003 and the ER Yokohama built in 2004, packaged for $44 million.
Two days before this, MSC also purchased another Panamax container ship called Baltic East from South Korea's Changjin Merchant Marine for US$10 million.
In other words, MSC "buy" 11 ships in more than 20 days.
In addition, industry insiders said that MSC is also very likely to sign a series of large orders for 23,000 teu container ships recently.
In contrast, Maersk, the world's largest shipping company, is very calm. Recently, Maersk released its financial report for the third quarter of this year. The company’s CEO Shi Suoren added when introducing the company’s third-quarter performance report that Maersk currently has no plans to build 20,000+ TEU ships. The company only stated that some of the 10,000 TEU to 15,000 TEU ships are aging and need to be replaced, because being the original owner is more cost-effective than chartering. The company will maintain the current fleet capacity of about 4 million TEUs.
Shi Suoren said, "We are very aware of the technical risks of currently ordering ships," he added.
Analysts from Copenhagen-based sea intelligence pointed out in a report released recently that MSC may soon replace Maersk and become the world's largest shipping company.
According to the latest data from Alphaliner, the current container ship capacity of Mediterranean Shipping is 3,855,684 TEU, and the company has 5 new large ships waiting for delivery. The total capacity of these 5 new ships is 115,000 TEU. After all ships are delivered, MSC’s The total capacity will reach 3970684TEU.
Maersk’s current operating capacity is 4094302 TEU, order capacity is 46140 TEU, and the total capacity including new ship orders is 4140442 TEU.
Consolidation market is hot
The price of the container shipping market has continued to run at a high level recently. On November 13, the latest Shanghai Export Containerized Freight Index (SCFI) released by the Shanghai Shipping Exchange was 1857.33 points, an increase of 11.6% over the previous period. The SCFI index has hit a new high since the 2008 financial crisis.
Zhang Yongfeng, director of the International Shipping Research Institute of Shanghai International Shipping Research Center, analyzed to a reporter from China Securities News that the recent epidemic in Europe and the United States has rebounded sharply. Import demand for daily necessities is strong, market volume is rising, container supply is tight, and the spot market freight rate The sharp increase drove the comprehensive freight index to rise.
"November is generally the traditional off-season for container shipping. This year's market conditions have far exceeded expectations. At present, the container shipping market has relatively abundant cargo and higher freight rates, continuing the pre-hot trend." Zhang Yongfeng said.
Data from the China Ports Association show that my country's foreign trade imports and exports have continued to improve recently, especially exports have further accelerated. In early November, the container throughput of the eight major hub ports increased by 13.1% year-on-year, an increase of 6 percentage points from the previous period. The foreign trade container throughput of the eight hub ports increased by 11.5% year-on-year, and the domestic trade increased by 18.3% year-on-year, both significantly faster than the previous period. In terms of subregions, the Yangtze River Delta and Pearl River Delta regions have seen strong growth in foreign trade business, with Shanghai, Ningbo, Guangzhou and Shenzhen growing at over 10%. Among them, the growth rate of Ningbo Zhoushan Port reached 33%.
With strong demand in the container shipping market, international shipping freight prices have continued to rise since June this year, and shipping prices on European routes, Persian Gulf routes, and South American routes have all increased significantly. At the same time, the domestic export container freight index is also rising sharply.
Han Jun, chief analyst of CITIC Construction Investment Transportation, believes that from the current situation, most shipping companies have already booked the space in late December. On November 22, major routes such as the European route will still see a rise in freight rates. According to information from major liner companies, freight rates will remain at a high level before the Spring Festival. During the Spring Festival next year, the shipping company will implement the suspension plan as usual. The maintenance of freight rates at a high level after March is a high probability event.
Zhang Yongfeng believes that the reason for the recent boom in the shipping market is the result of multiple factors. On the one hand, due to the impact of the global epidemic, demand was suppressed in the first half of the year, and many businesses had the need to replenish inventory; on the other hand, a large number of epidemic prevention materials were exported, and the demand for home shopping in overseas markets increased. In addition, the poor turnover of shipping containers further pushed up freight rates.
In a recent survey conducted by investors, CIMC said: “Currently, our company’s container orders have been scheduled to around the Spring Festival next year. The demand in the container market has increased significantly recently. The reasons are that first, affected by the epidemic, exported containers are scattered all over the world. The return is not smooth; second, foreign governments have introduced financial stimulus such as the epidemic relief plan, which has led to super strong performance on the demand side (such as living and office supplies) in the short term, and the housing economy is booming. It is currently judged that the “lack of boxes” situation will continue for at least some time. But the whole year of next year is not clear."
CITIC Construction Investment Research Report believes that the fundamental reason is the continuous and rapid growth of the demand side. According to data from the Container Trade Statistics Corporation (CTS), the growth rate of global container shipping trade volume remained flat in July 2020, and cargo volume accelerated in August and September. The volume of cargo in September increased by nearly 8% year-on-year. Looking at the year-on-year growth rate of the east-west trunk routes, the demand on the two major routes continued to expand, and the US route even expanded to a growth rate of more than 20%.
The research report pointed out that in the medium term, the replenishment of inventory in the US retail and wholesale industry has not yet ended, and the inventory cycle will last for at least half a year, laying the foundation for continuous improvement in demand. The achievement of RCEP can significantly reduce tariffs and non-tariff trade barriers, further strengthen the position of the manufacturing center in the Far East, and lay the foundation for the growth of regional maritime trade. In addition, from the supply side, the proportion of shipbuilding orders held is at the lowest level in history. Even considering the impact of new shipbuilding, the delivery period will be after the second half of 2023, and there is no basis for large-scale launch of capacity.
"It is still hard to say that the shipping industry has recovered in an all-round way. Overall, the global epidemic is a bad factor for the shipping industry. The epidemic has changed the cycle of cargo shipments, and traditional shipping seasonal characteristics are not so obvious." Zhang Yongfeng said.
Consolidation company makes a big profit
In the third quarter just past, the container shipping market experienced a shortage of containers and skyrocketing ocean freight. At the same time, all liner companies continue to implement strict capacity management and cost control. In this context, liner companies’ performance has increased significantly.
Despite the decline in cargo volume, through combing the performance of various liner companies, in the third quarter of 2020, the revenue of 10 major liner companies in the world is still higher than the same period last year. All 10 liner companies achieved profits in the third quarter, with a total profit of 3.412 billion U.S. dollars, which was less than 800 million U.S. dollars in the same period last year, which was 4.27 times the same period last year.
Among them, Maersk has the highest profit, reaching 1.043 billion US dollars, and it is also the only liner company with a profit of 1 billion. Evergreen Shipping's profit increased the most, with a year-on-year increase of nearly 60 times.
In addition, there are three liner companies that are particularly interesting.
Among them, Star Shipping's performance in the third quarter increased by 28 times. Who would have thought that this company was once on the verge of bankruptcy. More importantly, Star Shipping has seized this opportunity in the e-commerce market and opened multiple e-commerce routes this year, driving a substantial increase in performance.
In addition, Yangming Shipping ended its long-term loss and achieved quarterly profit for the first time. But at the end of September just before the announcement of the results, Yangming Shipping announced the retirement of its former chairman Xie Zhijian. But for this achievement, old coach Xie Zhijian contributed a lot.
Finally, HMM stabilized its profitability. HMM once ended 21 consecutive quarters of losses in the second quarter of this year. At that time, the industry had different views on whether it could continue to make profits in the third quarter. The market situation has created opportunities for HMM.
On the whole, with operating income basically remaining stable, the major liner companies have achieved profits several times or even dozens of times the same period last year, which can be said to have made a lot of money.
Looking ahead to next year, the analysis agency Sea-Intelligence also changed its previous forecast, predicting that the pre-interest and tax (EBIT) of the container shipping industry in 2020 will reach 14.2 billion US dollars. In April of this year, the agency predicted that the impact of the epidemic might cost the entire shipping industry US$23 billion.
Sea-Intelligence said: "There is no doubt that the performance of liner companies in 2020 will not only far exceed last year, but even better than the level of the past 8 years."
This forecast conclusion is based on the increase in freight and freight volume.
Data from Container Trades Statistics shows that in the first nine months of 2020, global container shipping volumes have fallen by 3.4%. However, the cargo volume situation has reversed sharply in recent months. In September this year, the global container shipping volume has increased by 6.9%.
Based on this, Sea-Intelligence believes: "If this growth is maintained in the fourth quarter, the global container shipping volume will only fall by 0.8% in 2020."
After the end of the third quarter, some large liner companies such as Maersk and Hapag-Lloyd also raised their full-year profit expectations. CMA CGM also stated that the market will remain strong for the rest of this year.
Although most liner companies are still more cautious about the market prospects and believe that next year's situation is unpredictable, Drewry believes that despite the second wave of the epidemic, they have optimistic expectations for liner companies' earnings in 2021.
