Feng Yangwen: Analysis of International Shipping Market Trends under the New Crown Epidemic
1. The current performance of the international shipping market
(1) International container freight rates continue to rise, and the demand for shipping capacity is strong.
Since the second half of 2020, the market has been in a state of shortage of space, shortage of containers, and rising freight rates . In the second half of 2021, there has been a 26-week chain-to-month increase, and the year-on-year increase has reached an astonishing 350%. The 21 international routes have reached the highest values in recent years. Among them, the freight rate of the European route reaches 8,300 US dollars/TEU [TEU refers to a container with a length of 20 feet, that is, an international standard container; FEU refers to a container with a length of 40 feet; 1 FEU=2 TEU. ]; the freight rates of the US East and US West routes reached US$18,000 and US$15,000/FEU respectively.
The increase in shipping prices is firstly due to the steady growth of our foreign trade. From January to July, China's total export trade was 1801.934 billion US dollars, a year-on-year increase of 34.89%. In terms of export markets, exports to the United States were US$302.63 billion, up 36.9% year-on-year; exports to the EU were US$276.55 billion, up 32.4% year-on-year, and exports to ASEAN were US$265.59 billion, up 33.3% year-on-year.
Secondly, due to the poor circulation of ships and container equipment caused by the congestion of foreign ports, the shortage of containers in domestic ports is still serious. The Global Container Availability Index CAx shows [a container availability index CAx of 0.5 indicates a shortage of containers, and a value greater than 0.5 indicates ample. ], container equipment is stranded overseas, foreign container sources are sufficient but the global circulation is not smooth. In July, the average availability index of 40GP boxes in major ports such as Los Angeles and Long Beach in the United States and Rotterdam in Europe were 0.88, 0.91 and 0.74 respectively, and Shanghai Port was 0.60.
In terms of route adjustment, under the epidemic situation, liner companies are more willing to put capacity on the Asia-Europe/North America route with high freight rates and strong transportation demand. From January to July, the Asia-North Europe route put into capacity 12.894 million TEUs, a year-on-year increase of 12.9%; the Asia-Mediterranean route put into capacity 5.875 million TEUs, a year-on-year increase of 8.9%; ; The Asia-US East route put into capacity 9.086 million TEU, a year-on-year increase of 13.2%. The number of canceled voyages of various routes decreased by 111, 128, 149 and 57 respectively year-on-year. In addition, the capacity investment of the three major alliances on all routes shows an increasing trend. Among them, the 2M alliance has accelerated the deployment of capacity on North American routes, and its capacity investment on the Asia-US West/US East routes was 3.359 million and 2.744 million TEUs, a year-on-year increase of 34.9% and 13.9% respectively. As the most important OCEAN alliance in the North American route, the capacity investment on the Asia-West/East route was 5.839 million TEU and 3.708 million TEU, a year-on-year increase of 9.6% and 9.8% respectively.
Under the impact of the epidemic, the profitability of liner companies has reached an unprecedented level. In the first quarter of 2021, the top ten major liner companies in the world (excluding MSC) had a total revenue of US$50.85 billion, a year-on-year increase of 56%; net profit was US$16.07 billion, a sharp increase of 2453.5% year-on-year. Rising profits and strong demand have driven the soaring demand for new ships from liner companies. According to Alphaliner's data, there were 30 new orders for global container ships in May, with a total capacity of 165,000 TEUs, compared with only 4 ships (4,000 TEUs) in the same period last year. ). At the same time, the current short-term (2 to 3 months) charter daily rent of container ships has been out of control, and the daily rent of container ships above 8,500 TEU has reached 10145,000 US dollars, setting a new record high.
(2) The price trend of international dry bulk cargo and oil shipping diverges, and the domestic coastal transportation market "doesn't slow down in the off-season."
International dry bulk shipping prices set a new record in the past ten years. The loose monetary policy of the economy drives up the price of bulk commodities, the concentrated release of iron ore, coal, grain and other shipping demand, the dry bulk shipping capacity is tight, and the Baltic Dry Bulk Index (BDI) climbed on May 5 To 3266 points, refresh the 10-year record. Afterwards, under the double suppression of national policies and rising wait-and-see sentiment caused by excessively high prices, the freight index continued to fluctuate and fell, and hit a low point of more than one month. Under the strong support of the rigid demand in the bulk market, the BDI index began to rebound and rise on June 8, and under the influence of iron ore prices remaining high and stable and coal prices continuing to rise, the BDI index rose by 116 points in a single day on August 20. 4092 points, the highest since mid-2010. Among the sub-indices, the Capesize Index BCI rose 286 points to 5997 points in a single day, the Panamanian Ship Index BPI rose 31 points to 3785 points in a single day, and the Handysize Index BSI rose 39 points to 3276 points in a single day. As of August 20, the average BDI index in the first eight months of this year was 2503.4 points, a year-on-year increase of 173.9%.
The international oil shipping market is basically in a continuous downturn. Tanker rental income fell to the lowest point in nearly 20 years, in stark contrast to the surge in the first half of last year. In particular, very large crude carrier (VLCC) earnings are even more bleak. The average daily rental income in the first half of the year was negative, while the average annual income in 2020 was as high as US$38,000 per day. Rental yields for Suezmax tankers have also been poor, with only a brief rebound during the Suez Canal blockage in late March. As of August 20, in the first eight months of this year, the average value of the Baltic Crude Oil Freight Index (BDTI) was 605.2 points, a year-on-year decrease of 29.8%.
Under the support of favorable factors such as the improvement of the global epidemic situation, the early recovery of industrial production, and the diversion of foreign trade market capacity, the coastal dry bulk transportation market has shown a "off-season not weak" market, and freight rates have risen to peak season levels. In the first half of the year, the average shipping industry prosperity index of Ningbo Shipping Economic Index (NSEI) was 108.1 points, an increase of 4.5% and 8% compared with the same period in 2019 and 2020.
4. The situation of shipping in the post-epidemic period
(1) The price of international container shipping will remain at a level higher than before the epidemic and lower than during the epidemic
1. In the post-epidemic period, the price of international container shipping will fall
. The company's profitability will remain until 2022. However, as the epidemic situation stabilizes, the international supply chain will gradually become smoother, and the port congestion problem that has plagued the international shipping industry for a long time will also be resolved. Then, the lack of space and boxes will disappear, and the supply-side problem that pushes up the freight rate will no longer exist.
From the perspective of demand, firstly, Asian developing countries represented by China and ASEAN have gradually become the "new engines" driving world economic growth. Relevant forecasts show that the growth rate of demand for routes in Asia will be 6.4% this year and next. And 5%, continue to be faster than 6.1% and 2.5% of the east-west trunk line, which means that the rapid growth of trunk line transportation demand and even freight rates will be unsustainable. Second, with the recovery of global production capacity, the demand for foreign imports will decrease, and the substitution effect of my country's export products will gradually weaken. In terms of US dollars, the year-on-year growth rate of my country's exports to the United States, the European Union, and ASEAN in July fell by 4.4, 10, and 18.6 percentage points respectively compared with June; in terms of major export products, China's mobile phone exports fell by 9.2% year-on-year, and exports of medical instruments and equipment The export value of seven categories of labor-intensive products decreased by 1.4% year-on-year (the export value of textile yarn, fabric and its products decreased by 26.7% year-on-year). Third, although the container throughput of US ports from January to July is still growing at a high speed, the growth rate of container throughput in July has slowed down significantly. The Port of Los Angeles increased by 4.1% year-on-year, the Port of Long Beach increased by 4.3% year-on-year, and the Port of Oakland experienced a year-on-year decrease of 3.7%.
From the perspective of the supply side, the supply of global shipping capacity may return to normal levels. Since the fourth quarter of 2020, the proportion of global container ship orders to the total existing shipping capacity has continued to rise, reaching 20% in June 2021, a record high in the past five years. It is expected that the newly delivered capacity this year will regain the level of millions of TEUs, a substantial increase compared with 2020, and will also exceed the level of 2019. From the perspective of dismantling capacity, this year may increase slightly, but the current market conditions have greatly weakened the willingness of shipowners to dismantle. As of June 2021, the dismantling volume has been less than 10,000 TEU for ten consecutive months. Capacity will also be limited. Institutions generally predict that the capacity of the global container fleet will increase by about 4% this year, an increase faster than that in 2020. Large-scale orders for new ships may still affect the improved fundamentals.
2. In the post-epidemic period, the price of international container shipping will be higher than the level before the epidemic.
First, the shipping alliance's ability to control the market has been strengthened. The entry and competition threshold of the current container transportation market is constantly rising, and the alliance operation is deepening. The three major liner company alliances (2M+HMM, OCEAN, THE) account for more than 80% of the global shipping capacity (of which European routes reach 100%). By 2020 It accounted for 80.9% in July 2021 and expanded to 82.3% in July 2021. As the scope of alliance cooperation gradually expands, alliance operations will continue to expand in the future. After this round of market conditions, the shipping alliances have gained huge profits, and they will have great confidence in future earnings. Second, as the industry concentration increases, market competition will become more rational. Liner companies have gradually got rid of the business strategy of lowering freight rates and grabbing market shares, and the focus of competition in the market industry has shifted from a single price-driven market share to value creation. The liner company has changed from a single carrier to an integrated logistics service provider, and industry services have changed from homogeneity to differentiation, and the industry competition pattern will be further optimized. Third, the international supply chain system will usher in reshaping. The degree of fragmentation of trade is getting higher and higher, and the degree of participation is getting wider and wider. Global industrial cooperation ushers in new ideas. Customers will pay a higher premium for reliable and stable services.
(2) The price of international dry bulk shipping will fluctuate at a level during the epidemic, and will gradually fall within 3 to 5 quarters, or continue until 2023 1. The price of international dry bulk shipping will continue in the post-epidemic
period High volatility
This round of dry bulk market rebound is supported by real demand, benefiting from the vigorous investment in infrastructure construction after the epidemic situation stabilized and the record-breaking export volume of agricultural products. Relevant forecasts show that the market demand for iron ore, coal and other bulk bulk cargo will remain strong.
From the perspective of demand, first, the recovery of the global economic situation has exceeded expectations. The International Monetary Fund (IMF) predicts that the global economic growth will reach 6% in 2021, 8.4% in China, 5.1% in developed economies, and 6.7% in emerging markets and developing economies. The significant improvement in the global economic situation makes global trade continue to be bullish, and the demand for imports and exports is expected to increase. Second, the demand for raw materials continued to be strong. The domestic steel demand has grown for more than three years, and the manufacturing industry in Europe and the United States is also picking up, and the demand dynamics are extremely strong. Goldman Sachs expects iron ore prices may not fall back until 2023. In terms of coal, the demand for Atlantic coal transportation has recovered, domestic coal stocks and available days have continued to decline, and the demand for terminal replenishment is strong. The tension in the coal market is expected to continue until next year or two. According to the prediction of relevant experts, the global coal seaborne trade volume will increase by 26 million tons in 2021, an increase of about 2% year-on-year; the Food and Agriculture Organization of the United Nations predicts that the total global food imports will reach 1.72 trillion US dollars in 2021, an increase of 12% year-on-year.
From the perspective of the supply side, first, the BDI index broke through 4,000 points, an 11-year pressure point, indicating that the shortage of effective transport capacity cannot be resolved in the short term, and the trade logistics chain is difficult to fully recover. Ports in South America and the Baltic Sea have experienced repeated epidemics, frequent port maintenance in Australia and Brazil, and port congestion has worsened. Data show that China's bulk carrier congestion has reached a five-year high, with an annual increase of 24% to 50.5 million deadweight tons, and the number of ships queuing is 76% higher than the five-year average. At the same time, high oil prices have led to ships slowing down, changes in trade flows have expected to continue to increase the demand for long-distance shipping, and the total port congestion of bulk carriers has remained high as a percentage of the fleet. Second, the expansion of iron ore and coal production has reached its limit. In the second quarter of this year, the shipments of major iron ore ports in Australia and Brazil have fallen by 2.3% year-on-year. According to Goldman Sachs research, in the next two to three years, the growth rate of iron ore supply will actually decelerate from the current level, while Australian iron ore producers will no longer be able to expand their production capacity at any rate. Iron ore prices will not plummet, but remain high (by historical standards).
2. In the post-epidemic period, international dry bulk shipping prices will gradually fall within 3 to 5 quarters, or continue until 2023.
First, the delivery capacity bottomed out and rebounded. After the clearing of capacity in the global shipping market has basically ended, the new shipbuilding market has obvious signs of bottoming out. At present, the world's shipping volume has reached 12 billion tons. Under normal circumstances, the volume of new ships corresponding to this volume is about 90 million dwt. In the stage of clearing the market capacity, the transaction volume of the new shipbuilding market in 2016 was only 30 million dwt; from 2017 to 2018, it basically returned to the normal level of 90 million dwt; In 2018, the transaction volume of new ships still reached 60 million dwt. This shows that the new shipbuilding market has bottomed out in 2016, and suffered a short-term correction due to the epidemic in 2020. If there are no major unfavorable factors in the future, the annual new ship trading volume can remain above 90 million dwt. The supply of transportation capacity is enough to gradually reach the balance between supply and demand from shortage, and finally the transportation supply exceeds the transportation demand. Second, the supply and demand pattern in the bulk market has gradually turned to oversupply. As the epidemic is properly controlled, port maintenance is completed, supply-side production rebounds, and port shipments surge, the supply-demand pattern will gradually turn into oversupply, and iron ore inventories are expected to continue to accumulate. The coal shortage situation will gradually improve as the peak season goes on and China's coal ban on Australia is relaxed. (3) The international oil shipping price will not see
a big improvement in the short term, but it
will be positive in the long run
Although the demand for crude oil shipping capacity in 2021 has recovered compared with 2020, the crude oil shipping volume will decrease by 5% compared with 2019, and the demand for ton-nautical miles will decrease by 5.1%. The demand for refined oil transportation capacity is more affected by the epidemic. It is estimated that the transportation volume in 2021 will decrease by 7.7% compared with 2019, and the demand for ton-nautical miles will decrease by 9.4%.
From the perspective of the supply side, it is difficult to improve the excess capacity of VLCC in 2021. At present, the global VLCC fleet is 834 ships, with 69 orders. It is expected that 30 ships will be delivered in 2021, about 20 ships will be dismantled, and the capacity of about 33 floating warehouses will be gradually released. The capacity supply will increase by 3.6%, exacerbating excess capacity. The VLCC capacity utilization rate is expected to be 79.9% in 2021 (84% in 2019).
2. Long-term benefits in the post-epidemic period
In the post-epidemic period, as the world's major economies gradually recover from the impact of the epidemic, the global crude oil demand gap will gradually widen, the fundamentals of the crude oil market will continue to strengthen, and oil demand will show signs of improvement. After five consecutive semi-annual increases, global oil product inventories have fallen by 6% from the previous month to 50.17 billion barrels in the first half of 2021, a year-on-year decrease of 2.6%. In view of the consensus on the outlook for oil product demand, on July 18, 2021, OPEC+ held a meeting and issued a statement, laying out a roadmap for the subsequent full lifting of the production reduction agreement. According to the latest arrangement, the production reduction agreement reached in April last year will be extended until the end of next year, but the production reduction progress will be earlier than the expiration date. Starting in August, the total production capacity will be increased by 400,000 barrels per month until the existing production cut quota of 5.8 million barrels is fully compensated, that is, it will be fully restored in September next year. This means that OPEC+ plans to completely cancel the 5.8 million barrels per day of production cuts by September 2022. If market conditions allow, the agreement will ease the looming supply crunch.
However, for OPEC+'s own interests, the supply of crude oil will be maintained in a stable range, and there is a high probability that the phenomenon of oversupply will not occur. OPEC+'s crude oil supply, global oil demand, and their impact on the tanker shipping market still deserve close attention.
V. Development Suggestions
(1) Strictly implement epidemic control and ensure the normal operation of ports. In
July, the World Health Organization issued a warning to the world that the new coronavirus mutant strain Delta may sweep the world again, causing a second wave of large-scale global epidemics. Although the vaccination work in many countries is currently carried out in an orderly manner, the number of new infections worldwide remains at 500,000 per day. The epidemic situation at home and abroad is showing a large-scale rebound and multi-point distribution trend, and the pressure of foreign defense imports continues to increase. In this context, as an important node of foreign defense imports, ports must fully prepare for long-term epidemic prevention and control, strictly implement various epidemic prevention and control measures, and strengthen scientific management of key links such as personnel management and cold chain freight, and organize Tightly weave the prevention and control network, carefully prepare for emergencies, and resolutely hold the bottom line of epidemic prevention and control.
(2) Strengthen the research on shipping trade and realize the positive interaction between ports and shipping economy and trade. The
current global political and economic situation is more uncertain, trade protectionism and anti-globalization thoughts are on the rise, and external risks and challenges are increasing. We should pay more attention to the situation of foreign trade import and export. and the trend of freight rates in the shipping market, keep abreast of regional and fluid changes in global trade, conduct deeper correlation research on different types of cargo, commodities, and routes, establish an industry risk response mechanism, and analyze the stages of international trade and shipping markets Pre-warning based on specific characteristics, keeping up with local adjustments in the global supply chain, scientifically managing marketing strategies and route layouts, to achieve deep integration and benign interaction between ports and shipping, economic development, and trade flows.
(3) Utilize innovative and intelligent elements to boost service energy efficiency upgrades
In recent years, the development direction of global ports and shipping has shifted from resource integration, corporate mergers and acquisitions to technological innovation and technological research and development. Wisdom, greenness, efficiency, and digital have become the core topics, and the high freight rate environment has promoted the transformation of the industry. The "Outline for Building a Powerful Transportation Country" emphasizes that technological innovation should be placed at the core. Port and shipping companies need to give full play to the initiative of technological innovation. With the help of emerging technologies such as the Internet of Things, artificial intelligence, 5G, cloud computing, and big data, to improve operational efficiency and safety levels, carry out wharf upgrades, shoreline land resources, etc. Development and other research, explore applications such as Beidou high-precision navigation and intelligent driving, and promote the digital and intelligent transformation of the port and shipping industry.
(4) Keep up with the development of industry alliances and create a modern logistics service system. In the
early stage of the epidemic, the alliance of liner companies cooperated to reduce the supply of market capacity, which made the sea freight soar and gained huge profits. Although ports are important in the supply chain, their bargaining power is weak. weak. As the global economic development enters a new normal, the development of ports has also slowed down from high-speed growth. In order to avoid the aggravation of problems such as overcapacity and homogeneous competition in the industry, on the one hand, explore the formation of diversified investment alliances with upstream and downstream enterprises in the port supply chain , Strengthen the stability of cooperation with capital ties, and open up a mutually beneficial and win-win situation. On the other hand, accelerate the transformation of ports from traditional logistics transfer nodes to modern comprehensive service nodes integrating trade, storage, logistics and finance, fully consider factors such as the port's own location conditions and hinterland conditions, and establish a port bulk commodity trading market, greatly improving the industry. Concentration, to solve the problem of lack of commodity pricing power.
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