By Arthur Chen      Photo：Ana Benet 

The Russian-Ukrainian war, the repeated lockdowns of the Chinese pandemic and global inflation have gradually affected the container shipping market. The global container shipping trade is currently facing downward pressure on both cargo volume and freight rate. However, in the short term, port congestion in Europe and the United States and interruption of railway logistics will continue, providing support to high spot freight rates. However, in the long term, with port congestion eased, the rapid growth of shipping capacity in the next two years and the downward pressure on global container shipping operations, the process of normalization of the container market may accelerate. This year's forecast for global GDP growth has been lowered by 1%, and the volume of containerized seaborne trade is facing downward pressure. Inflationary pressure has continued to increase the cost of living for consumers. The rise in commodity prices is particularly evident in the EU countries; the rebound of the covid in mainland China and the cooling of the economy are also affecting people's willingness to consume, the global consumption structure is gradually shifting from commodity consumption to service consumption, which also puts pressure on container shipping. Although the demand side is gradually under pressure, the global logistics disruption and port congestion still provide support for the market, and it is still difficult to ease in the short term. In the medium and long term, with the easing of logistics disruptions and the sharp expansion of the container fleet in the next two years (the global container fleet capacity is expected to grow by 8.3% in 2023), the supply of available transportation capacity will increase significantly, and the market will finally, gradually return to normal, and the current downward pressure on the growth of global container transportation may accelerate the change of this trend.

In the first three months of this year, global carriers had profit of about $43.9 billion. According to SEA report, the net profit of the four companies exceeded US$5 billion in the first quarter of 2022, with CMA CGM taking the lead with US$7.64 billion, Maersk following with US$7.07 billion, and COSCO Group with US$6.26 billion. Ocean Network Express (ONE) ranked first with $5.23 billion. Note that this level of profitability is not driven by volume growth! With the exception of ZIM volumes, which increased by 5%, the rest of the global shipping lines had sharp declines in volumes year-on-year. The slowdown in global freight volumes can also be seen in a review of the market by the Container Trade Statistics (CTS). The data show that the volume of freight through April this year fell 3.6% compared with the same period last year. Following a 1.4% increase in January, global freight volumes fell for the next three months, falling 9% in April alone. "This level of profitability more reflects the current freight environment," noted Sea-Intelligence's CEO. The Biden administration has accused the world's nine largest shipping companies of making $170 billion last year, or about $43 billion per quarter on average. That annoys Biden, who has moved to curb this "deprivation" of U.S. importers. Unexpectedly, in the first quarter of this year, shipping companies continued to "deprive" importers despite the low volume of goods, thereby pushing up inflation. It is not difficult to guess that in the future FMC, the EU will inevitably increase strict supervision on the operation methods and freight rates of shipping companies.

Inflation affects the demand of European and American consumers, coupled with the strict supervision of European and American governments, it has formed a lethal effect on spot freight. In the latest week, the Shanghai Export Container Freight Index (SCFI) ended its four-week winning streak and turned down again. On June 17, Shanghai Shipping Exchange announced that the latest SCFI composite index fell by 0.27% to 4221.96 points, and the freight rates of the three major long-haul routes fell across the board. Among them, the freight rate per FEU to the US east coast fell by US$25 to US$10,073, a weekly drop of 0.25%, which continued to hit a new low since August last year; the freight rate per FEU to the US west coast fell by US$141 to US$7,489, a weekly decline of 1.85%, a new low since late December last year. At the same time, the freight rate per TEU to the European fell by US$50 to US$5,793 last week, a weekly decline of 0.86%, hitting a new low since June last year; the freight rate per TEU to the Mediterranean fell by US$70 to US$6,487, a weekly decline of 1.07%. Some analysts predict that the crazy party of the high rate will dance until September at most, and the freight rate in October may have a chance to collapse. After all, inflation and interest rate hikes by central banks have determined that consumers’ demand have been greatly reduced, and the biggest weapon to curb inflation is to lower consuming demand. Do you still have stocks of shipping companies on hand?  Make up your mind quickly hold or sell ?

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