Source: Gelonghui
Is the global trade alarm sounding again?
Under the geopolitical conflict in the Middle East, the Red Sea crisis is fueling a major revival of the shipping market.
On Monday, Hong Kong and A shipping stocks collectively strengthened. As of press release, A-share Phoenix Shipping had risen or stopped, while COSCO Maritime Holdings and Ningbo Ocean had risen more than 6%.
The Hong Kong stock Oriental Overseas International rose more than 6%, and its stock price hit a new high since August 2022; COSCO Marine Holdings rose more than 5%, and its stock price hit a new high since November 2007.
Since the beginning of the year, Orient Overseas International has increased by nearly 30%, and COSCO Maritime Control has increased by nearly 70%.
Since the outbreak of the conflict between Palestine and Israel, oil prices and freight rates have been rising steadily.
Currently, the Red Sea crisis continues to increase capacity constraints, and shipping market prices are soaring.
Is the global trade alarm sounding?
Recently, Yemeni Houthis once again attacked 3 ships doing business with Israel.
On May 24, local time, a spokesman for the Houthis in Yemen reported that the armed forces attacked the “Alexander” in the Arabian Sea, the “Yanis” in the Red Sea, and the “Essex” in the Mediterranean.
The Houthis claimed that all three ships had business dealings with Israel and were therefore targeted.
Earlier this month, Yemeni Houthi leaders said that all ships bound for Israeli ports would be attacked by the group, not just those in the Red Sea region that had been attacked before.
Since November of last year, the Houthis, allied with Iran, have repeatedly launched drone and missile attacks on ships on important waterways such as the Red Sea, the Strait of Mander, and the Gulf of Aden.
This has also forced shipowners traveling between Asia and Europe to detour longer and more costly routes to Africa.
The supply of global shipping space and containers has been limited, and soaring freight rates have sounded a wake-up call for global trade.
According to data from shipping market tracking company Xeneta, the average cost of transporting a 40-foot container in a short period of time between the Far East and Northern Europe reached 4,343 US dollars last week, about three times that of the same period last year.
Xeneta's senior shipping analyst said:
“From the Far East to the west coast of the United States, the cost of spot freight is likely to exceed the level of the Red Sea crisis earlier this year, which shows how sharp the recent increase has been.”
With the impact of the shrinking shipping container capacity, the spot price of freight has risen by about 30% in the past few weeks, and the trend is rising.
Xeneta warned that freight rates could continue to rise in June, and that the increase was “sharp.”
Earlier, shipping giants Dafei and Maersk had already issued June price increase letters. After Dafei's shipping schedule on June 1, the FAK price rose to 3200/6000 (up 500/1000 from the previous period). Maersk's FAK price for the late June shipping schedule is 2825/5500 (up 300/600 from the previous period).
Logistics providers have also warned global shippers about a shortage of containers. OrientStar Group (OrientStar Group) warned in a note to customers:
“Carriers are currently facing serious equipment shortages due to long-term congestion, flight gaps, and increased demand due to South American tariffs. Large quantities of goods were delayed due to a shortage of EQ (equipment), leading to a large backlog, thus further straining the market space. We are doing our best to encourage shippers to schedule empty box pickups as early as possible in order to use up resources early.”
Oriental Star Group said that the new round of comprehensive fare increases is scheduled to be held on June 1, and that the additional fee of 1,000 US dollars is that carriers have become a bit “greedy” in the face of a sudden increase in demand.
What's next for the shipping market?
The perfect storm of global trade continues to unfold.
Not long ago, Damo pointed out in a report that due to the Red Sea crisis interfered with the capacity of the shipping market, there was a shortage of capacity on European routes. Combined with newly delivered ships, the shortage of capacity could not completely make up for the shortage of capacity, and shipping prices were soaring.
From the end of March to May 17 this year, the Shanghai Export Container Freight Index (SCFI) rose 46% cumulatively. Among them, freight rates for European and Mediterranean routes increased by 53% and 32% respectively, while freight rates for US West and Eastern US routes increased by 47% and 36% respectively.
Previously, shipping was diverted to the Cape of Good Hope route, which affected about 30% of global container trade, and also increased the transportation distance of related routes by about 30%. If Red Sea disturbance continues, it will consume an additional 9-10% of global container shipping capacity.
However, Damo also predicts that global economic growth will remain stable in 2024-25. China's export growth rates in 2024 and 2025 are 8% and 6% respectively. This also means that the shipping industry is affected and may experience a short upward cycle in 2024-25. Once the Red Sea disturbance disappears, the container shipping industry will return to a cyclical downturn.
As far as the industry is concerned, Tianfeng Securities pointed out that since late April, shipping companies, multi-purpose shipping companies, freight forwarding companies, and box-building companies in the shipping industry chain may benefit from the recovery in freight demand, peak season, rush shipping, etc.
European and American routes are greatly affected by supply and demand, and freight rates have risen sharply, which may be transmitted to offshore and domestic trade routes in the future; consolidated cargo may spill over to multi-purpose ships, driving up freight rates.
In addition, freight forwarding companies are benefiting from price increases, and single-box profits are expected to increase under the integrated logistics service model; air freight benefits from the overflow of consolidated cargo, driving freight rates to rise. Container manufacturing benefits from lack of containers, and container production is expected to double and prices to rise in 2024.