It comes as an accelerating decline in freight rates on major trade routes is prompting industry analysts to revise forecasts of a “normalisation” of the container market.
According to a new HSBC research note, at the current rate of decline in spot rates, shipping market rates could fall to 2019 levels as early as the end of this year, compared with the previous expectation of mid-2023.
The report’s authors noted that the Shanghai Container Freight Index (SCFI), which has fallen 51 per cent since July and an average weekly decline of 7.5 per cent, would take the index back to pre-pandemic levels if it continued to fall.
“Weaker than expected demand, faster easing of congestion and price competition for marginal volumes have led to a sharp decline in freight rates,” the bank’s analysts said.
Against this backdrop, HSBC’s shipping, Ports and Asian Transport research team is pushing its “trough scenario” – the industry’s bottom point – to mid-2023, compared with its previous forecast of 2024.
There are “significant downside risks” to liner company profits for 2023 and 2024, the report said, so the bank has cut its profit forecast by “as much as 51 percent” and lowered its dividend forecast.
HSBC said the recovery of capacity after the Golden Week holiday would be one of the “key points” in determining whether “freight rates stabilise soon”. The bank added that the potential change in guidance, likely to be revealed in liner companies’ third-quarter revenue reports, could provide insight into how successful shipping companies have been in maintaining contracts.
Still, bank analysts expect shipping lines to be forced to take “drastic measures” if rates fall to sub-economic levels and expect capacity constraints to adjust, especially when rates fall below cash costs.
Meanwhile, Alphaliner reported that congestion at northern European ports and two eight-day strikes at Felixstowe, the UK’s largest container port, were not enough to prevent a “significant” 49 per cent fall in SCFI’s China-Nordic business in the third quarter.
According to Alphaliner, THE 18 Alliance loops (six for 2M, seven for Ocean and five for The) called at 687 ports in northern Europe in the third quarter, 140 fewer than their actual affiliations. THE consultancy said MSC and Maersk’s 2M alliance fell by 15 per cent and Ocean Alliance by 12 per cent, while The Alliance, which had retained the largest affiliate in the previous assessment, fell by 26 per cent over the period.
“It’s not surprising that the port of Felixstowe had the highest percentage of missed connections on the Far East Loop in the third quarter,” Alphaliner said. The port missed more than a third of its planned stops and missed the Ocean Union Loop’s double docking. The ports of Rotterdam, Wilhelm and Zeebrugge are the main beneficiaries of transfer affiliations.
During the epidemic, you shall wear Lanhine’s face mask.
Post time: Oct-14-2022