Singapore port "big jam" shipping prices soar
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2024-06-03 19:26
Since last November, conflicts in the Red Sea have had a profound impact on the global shipping industry. The forced overhaul of ship navigation plans has not only affected major ports in Asia and Europe, but has also put unprecedented pressure on global supply chains. Cargo ships detour, superimposed on the extreme weather in Southeast Asia, the port of Singapore, the world's second largest container port, is facing serious congestion problems, and global shipping prices are soaring again.
Cargo ship backlog
In June, the port congestion is still increasing. As the world's second largest container port, the Port of Singapore has become a new congestion focus. According to data from analysis agencies, container ships currently have to wait up to seven days for berthing in Singapore, and the total capacity of the backlog of container ships is as high as 450000 TEUs, far exceeding the high point during the outbreak of the new crown epidemic.
A person engaged in cross-border e-commerce told a reporter from Beijing Business Daily that a batch of goods was originally expected to arrive at the Port of Singapore on May 27, and then postponed to June 1. Ask again on June 1, and it will take another two weeks.
The report said severe congestion has forced some carriers to abandon plans to call at Singapore ports, which will exacerbate the burden on downstream ports that need to handle more cargo. Delays have also caused ships to pile up, causing more congestion and disruptions in downstream ports. The situation is expected to deteriorate further in the coming month.
In addition to Singapore, Durban, Dammam, Chittagong, Colombo, Jebel Ali and other ports are also heavily congested. At present, the anchorage time in Singapore is 84 hours and Durban is 79 hours. Shanghai and Qingdao are also experiencing the phenomenon of large numbers of container ships berthing. As the world's largest container port, the berthing time of Shanghai port has reached the highest level in three years.
"Inefficient cargo movement has led carriers to cancel regional stops and blank flights on long-haul routes to restore flight reliability, further reducing already strained capacity," HSBC said in a note to clients."
At present, there is not only a shortage of ships on the market, but also a shortage of containers. The latest report released by the shipping consulting company linerlytica shows that the increasing port congestion has further exacerbated the already tight container market. Currently, 2 million TEUs of capacity are stranded outside ports, accounting for 6.8 per cent of the global fleet capacity.
A person in charge of a freight forwarding company said that Singapore's port congestion will, first, extend the original shipping time, second, reduce the rate of ship orders, and third, affect the cargo throughput of nearby ports. Shipping plans were affected and some shipping companies had to cancel their scheduled stops.
Freight rates soar collectively
Port congestion is ultimately reflected in freight rates. On May 31, the Shanghai Shipping Exchange (hereinafter referred to as the "Air Exchange") announced a new issue of the Shanghai Export Container Freight Index (SCFI), which rose sharply again without surprise. The SCFI composite index was at 3044.77 points, up 341.34 points, or 12.63 per cent, from the previous week and 57 per cent from the previous month. 13 sub-routes only Japan's Kanto line freight rates fell slightly, the remaining 12 all rose, the United States West line freight rates rose nearly 20% in a single week.
Since the release of the index in 2009, the SCFI index has broken through 3000 points only once, in April 2021, when the new crown epidemic caused chaos in the global supply chain and container freight rates rose more than 10 times in a year.
Port congestion causes disordered transport capacity structure and low turnover efficiency, which is an important reason for the continuous rise of freight rates, but the problems exposed behind it are increasingly complex. The person in charge of the above-mentioned freight forwarding company said that there were three main factors in this round of freight increase: first, after the Red Sea crisis, the ships took a detour, the voyage was extended, and the empty cabinets could not return to the dock, resulting in the shortage of cabinets. Second, at present, large ships are basically transferred to run new energy vehicles to avoid high taxes and fees before August. Third, the port of Singapore is blocked, and ocean-going cabinets are concentrated in Singapore to transfer large ships. It is reported that shipping rates will continue to rise in June.
The SCFI index mainly represents the booking price in the next 1 to 2 weeks. All routes rose in the current period, which to a certain extent shows that the high freight rate situation in the global shipping market will be maintained until at least the middle of June.
At the same time, this is the off-season shipping market set off a "price rise tide", Maersk, Dafei, Hapag-Lloyd and other head shipping companies have disclosed route freight rate increase information, price increases covering Asia to Europe, North America, South America and other directions of the route, some routes rose nearly 70%. COSCO Shipping Container Lines Co., Ltd. also issued a price increase notice, stating that the shipping price from the Far East to the United States and Canada will rise sharply, with an increase of US $1000 to US $2000.
Extreme weather adds fuel to the fire
As for the reasons for the increasing congestion in major ports, in addition to the shortage of capacity caused by the resumption of the Red Sea, the early peak demand season in Europe and the United States and the impact of extreme weather have gradually attracted the attention of the industry.
Regarding the weather, some analysts said that the bad weather in Southeast Asia at the end of April caused some shipping delays, causing shipping carriers to skip some port calls or shorten the turnaround time at the port of destination, which means that the number of empty containers shipped back to China has decreased.
"There is already congestion on the major routes and meteorological problems are prone to adding fuel to the fire. Globally, 2024 has the potential to be the hottest year in history, and as summer enters in the northern hemisphere, from the Red Sea to the Panama Canal, shipping that has been in chaos is likely to be affected again as the waterways dry up." Industry insiders said.
"The euro zone's May PMI initial value rose above expectations, reflecting the current strong recovery momentum in European manufacturing and services demand. China, as a major importer of Europe, has a large demand for capacity, resulting in a serious shortage of containers and spaces. A similar situation is also playing out in North and Central and South America." Hong Kong letter futures shipping researcher Ju Weihao said.
In addition, on the demand side, a report from Societe Generale Securities shows that interest rates peaked at the end of 2023 and demand for U.S. commodities gradually rose, while the U.S. ended a year-and-a-half-long de-treasury cycle and began to replenish its inventory. Specifically, equipment, furniture, textile and other industries with high export dependence have shown signs of replenishment. The U.S. replenishment and imports are basically synchronized, so the increase in U.S. import growth may boost exports from related countries. As a result, this year's shipping season has arrived ahead of schedule, overlaying the problem of insufficient supply of capacity, and freight rates have naturally risen rapidly. According to a recent CNBC report, several U.S. logistics managers have said they will bring forward the peak replenishment season from July to June to avoid any delays caused by the Gulf port labor strike in the fall.
Industry insiders believe that the shipping price increase is driven by various factors such as the Red Sea situation, foreign trade companies' "grabbing exports", and shipowners' price increases. It is expected that freight rates will still fluctuate at a high level in the short term, but will not continue to increase significantly. The increase in freight rates will not last long and is expected to ease within 3 months.
When announcing its first-quarter financial report, France's Dafei Shipping Company predicted that as the delivery of new ships accelerates, global shipping capacity will be boosted and shipping freight rates are expected to decline in the future. "The Red Sea situation has absorbed almost all of the new capacity put on the market in the first quarter," Ramon Fernandez, the company's chief financial officer, said on a conference call." He predicted that the upward pressure on freight rates due to regional conflicts and strong consumer demand "will decline in the second half of this year".
Beijing Business Daily reporter Zhao Tianshu
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