Transportation & Logistics Analysis

Container shipping: a controlled lull

August 16 2022

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BAROMETER. The beginning of summer has been marked by a moderate erosion of sea freight rates leaving Asia, despite low demand, while the East-West transatlantic corridor remains bullish.

In most of the major Western economies, the focus during the summer is on the fight on inflation, as evidenced by the anti-inflation plan of the Biden administration adopted by the US Senate on 7 August or the measures in favour of purchasing power decided in France. However, at least for the time being, the fundamental situation has changed little.

In July, a moderation effect took hold on the spot FAK rates from Asia to Europe and the United States, though US demand seems to be resisting better than that of Europe in July. 5-digit freight rate levels are gradually disappearing from tariff schedules... and from the resulting invoices. Weak demand is pushing the major international freight forwarders to renegotiate a rate drop in their transport purchase terms with shipping companies. These reductions are not yet fully reflected in sale prices, which contributes to an improvement in margins, but on disappointing volumes.

In the direction Europe to Asia, there is a gradual erosion of rates due to a lack of volumes.

On the East-West Transatlantic routes, freight rates continued to increase. One of the reasons for this trend is increased congestion on the East Coast of the United States.

Pressure in France

Although on the decline, the average container revenue collected by shipping companies remains on historical highs. Companies should therefore be able to record results for 2022 about twice those of 2021, if the theory of a gradual decline to stability is confirmed in the second half of the year. The interests of the major international freight forwarders will also not benefit from a brutal market crash, as shown by their 2021 financial results.

The "super-profits" generated by energy and shipping companies are beginning to provoke controversy, and some countries have inacted the introduction of a tax on these exceptional profits. Under pressure, CMA CGM is stepping up its efforts from 1 August 2022. The group had initially announced a discount of €500 per 40’ container granted to the 14 major French metropolitan retailers and on all imports to the Overseas Territories. It was decided to go even further. The reduction in freight rates has increased to €750 and now concerns all imports into metropolitan France as well as the Overseas Territories. The discount is thus extended to all customers, from large groups down to SMEs and VSEs. Finally, a drop of €100 per 40-foot container for all French exports has also been put in place (...)

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Expert in Ocean shipping for 25 years, Jerome puts all his knowledge of the industry to contribution for Upply. Ship captain at heart, he has written the English-French Lexicon of Containerized Shipping (Paris: CELSE, 2001).
See all its articles