Global supply chain risk increases! The cost of European lines will soar

Xeneta shipping market analysis platform, based in Oslo, Norway, recently warned that the current container shipping market rates are shipping companies subsidizing enterprises to ship goods around the world, and it is expected that the cost of shipping will still rise next year, and large container shipping companies will not allow such a situation to continue. It will also increase the risk in global supply chains.

For such an assessment, senior executives in the shipping industry pointed out that it is already clear that the largest increase in operating growth next year will be the European line, the EU will implement the Emissions Trading Scheme (EU ETS), and start to charge carbon taxes; The Suez Canal is raising tolls by 5-15%; The German Port of Hamburg will raise port fees by 6.5%. And costs are rising because of inflation.

The European line is the route with the largest increase in new ship capacity next year, and the current freight rate is seriously low. At present, most of the new fuel ships under construction are very large container ships of more than 15,000 boxes, most of these ships are only suitable for sailing in Europe, in the case of continued excess capacity, freight prices have been significantly lower than the cost price, large container ship companies will certainly make a difference.

Patrik Berglund, CEO of Xeneta, said that in 2023, global long-dated freight rates were reduced by nearly 60 percent, with both short and long term freight rates falling by about 80 percent across the Atlantic to the East Coast of the United States and the Far East to Europe. Freight rates are so low that container ship companies are effectively subsidizing businesses to ship goods around the world.

Berglund believes the big container lines will not allow this to continue and will try to push up rates, with shippers who sign long contracts at lower prices likely to be the first to suffer when the market turns. For unprofitable offers, shipping companies will seize every opportunity not to carry these customers' containers.

Industry executives believe that Xeneta's assessment is not unreasonable, shipping companies in addition to reducing the supply by reducing the shift, the recovery of the electronics industry next year has seen the dawn, the second quarter of next year if the international form of easing, is expected to accelerate growth. If the Russian-Ukrainian conflict ends next year, the container shipping market is likely to have a big reversal, post-war reconstruction materials delivery, energy prices, European consumer confidence, economic improvement and so on can be expected, then the current low freight rates are expected to recover significantly.

At present, the freight rate of the European route has been lower than the cost price, the freight rate of each large box (40 feet container) is only 750-800 US dollars, and the shipping company of the European route with the largest 24,000 box ships is estimated to cost about 1000 US dollars per large box, and the cost price of the container ship of about 8500 boxes will be raised to about 1500 US dollars.

At present, the large ship companies have planned to increase the European route freight rate on November 1, each big box is expected to increase by about $1,000, the more optimistic freight forwarder in the market is estimated to have the opportunity to increase by $600-700, and some industry insiders think that it can be increased by about $500, but all think that the freight rate after the increase will not be too durable, may soon fall back.