What is the trend of international container freight rates

Influenced by factors such as the continued strong demand for international container transport and the obstruction of the logistics supply chain caused by the global spread of the COVID-19, last year, the supply and demand of the international container shipping market was unbalanced, the capacity of container ships was tight, and the price of many links of the maritime logistics supply chain rose. What is the trend of the international container shipping market in the near future? Will prices continue to skyrocket? Recently, reporters interviewed officials from relevant departments and industry experts of the Ministry of Transport.
It is difficult to alleviate the imbalance between supply and demand
"International sea freight rates are market regulated prices, mainly determined by market supply and demand." Jia Dashan, Vice President of the Water Transport Science Research Institute of the Ministry of Transport, believes that the main reason for the significant increase in container freight rates last year was the imbalance between market supply and demand.
Generally speaking, container capacity is mainly determined by two factors: the turnover rate of empty containers and the operational efficiency of ships.
In terms of the supply of empty containers, China's exports of heavy containers on international routes are generally greater than imports of heavy containers. In addition, China has taken the lead in controlling the epidemic, resuming work and production, and a large amount of demand for goods has begun to shift to China, resulting in a significant increase in demand for empty containers. At the same time, the overseas circulation and turnover of containers are not smooth, and the return of empty containers by sea is slowing down, resulting in a shortage of empty containers.
However, China is the largest country in the manufacturing of sea freight containers. Since the second half of 2020, the Ministry of Industry and Information Technology and other departments have actively coordinated with China's container manufacturing enterprises to fully expand container production. The Ministry of Transport has actively coordinated and guided liner companies to increase the return of empty containers from overseas ports. At present, the shortage of empty containers in China's ports has been basically solved, and the supply of new containers is adequately guaranteed, reducing the impact on freight rates.
At the same time, the gap in ship capacity is not as easy to fill. According to Alphaliner, an international shipping consulting firm, the total container capacity of container ships worldwide was 24.97 million TEUs at the end of 2021, an increase of 4.6% for the year. Except for necessary repairs and maintenance, all available ships worldwide have been put into the market. Due to the low elasticity of ship capacity supply, new ship orders generally require a shipbuilding cycle of more than 18 months to be launched into the market. In the context of a surge in demand, supply cannot achieve rapid growth.
Even more severe than insufficient transportation capacity is poor transportation turnover. "Foreign ports, especially those on the West Coast of the United States, are severely congested, coupled with a poor inland transportation system, resulting in significant capacity losses," Jia Dashan said. According to statistics, last year the ship booking rates of 50 major ports around the world all significantly decreased. The comprehensive booking rate index for global main routes released by the Shanghai Stock Exchange has remained within 20% for a long time (usually 72% -73% before the epidemic). Although there has been some improvement this year, it only rebounded to around 28% by April. Analysis shows that this supply-demand imbalance will continue in the short term.
Freight rates will continue to operate at high levels
"The highly anticipated increase in shipping costs mainly refers to the increase in spot market freight rates." Jia Dashan said that the global container transportation market is mainly dominated by long-term contracts, with long-term contract goods currently accounting for about 70%.
Small and medium-sized foreign trade enterprises mainly adopt spot market freight rates. "In the situation of tight space, some freight forwarding companies have significantly increased the sea freight and surcharges of liner companies. The more freight forwarding levels there are, the greater the increase." Jia Dashan believes that this is also an important reason why some companies reported a "crazy increase" in freight rates last year.
According to analysis, from the supply side perspective, it is expected that the new container ship capacity for the whole year of 2022 will still be relatively low, with a new ship delivery volume of about 1.027 million TEUs, an increase of about 4.1% compared to the total market capacity at the end of last year, and a slight decrease in increment compared to 2021. From the demand side, the overall global demand for container shipping will remain strong in 2022. The World Trade Organization predicts that global commodity trade will grow by 4.7% this year. According to predictions from multiple domestic and foreign institutions and shipping companies, the growth rate of international container shipping demand in 2022 will also be around 4%.
The head of the relevant departments and bureaus of the Ministry of Transport said that in 2022, the demand and supply of the global container shipping market will basically maintain synchronous growth, but there is uncertainty about the stability and smoothness of the international logistics supply chain, mainly because the COVID-19 is still spreading around the world, and the congestion of some major overseas ports has no obvious signs of improvement. Jia Dashan believes that the congestion problem in some major overseas ports continues to affect the global shipping logistics supply chain. It is expected that container shipping rates will remain high in the first half of this year, and the supply and demand situation of the global container shipping market in the second half of the year, as well as the development of overseas epidemics and port congestion, will continue to determine the market direction.
Make every effort to stabilize the logistics supply chain
Since the outbreak of the epidemic, many overseas ports have been congested and container shortages have directly led to difficulties and high freight costs for foreign trade enterprises, causing heavy damage to the global shipping logistics supply chain.
Despite numerous challenges, Chinese ports remain stable and unobstructed. According to officials from relevant departments of the Ministry of Transport, in 2021, the Ministry actively guided 13 major global shipping companies, including COSCO Shipping Group, to invest 27 million TEUs in four major export routes in China, an increase of 19.6% compared to 2020, far exceeding the average global increase of 4.6% in cabin investment. The port operation is also normal and orderly, with Shanghai Port's container throughput ranking first in the world for 12 consecutive years. On the basis of completing a throughput of 43.5 million TEUs in 2020, it further jumped to 47 million TEUs last year.
In 2022, China's foreign trade faces many uncertain factors, and stabilizing foreign trade and ensuring the stability and smoothness of the industrial and supply chains still require joint efforts from all departments and links. Recently, the Shanghai Shipping Exchange released a report showing that although the local epidemic in China has shown a sporadic trend in recent times, the overall epidemic situation in the country is controllable, supporting the export market to continue to maintain a positive trend and driving the container throughput of China's ports to remain high. The national port cargo throughput and container throughput continued to maintain stable growth in the first quarter.
"Despite the recent sporadic outbreaks of COVID-19 in China, major hub ports still maintain 24-hour efficient operations, quickly solving the problem of container collection and distribution. This reflects that China's efficiency indicators for container ships' in port and berthing operations in major coastal ports are among the top in the world. Compared with the long-term inability to alleviate congestion in some major overseas ports, China's international maritime logistics supply chain has shown strong resilience." The person in charge of relevant departments and bureaus of the Ministry of Transport pointed out.