Sound the alarm! Global shipping companies are under pressure! Asia-US container exports continue to decline

Global shipping companies are under pressure as Asia-US container exports are declining Sound the alarm!

Asia-US Export Shows Continuous YoY Decline for 8 Months

According to data from the Japan Maritime Center (JMC), in April, the outbound container trade from 18 Asian economies to the US decreased by 17.9% YoY, to 1,543,889 standard containers. For the first four months of this year, Asian exports to the US decreased by 25.2% compared to the same period in 2022, to 5,540,313 standard containers.

In April, many major commodities experienced a sharp decline, including vegetables, grains, fruits, oilseeds, and tea, which fell by 62.9% to 22,513 standard containers; toys and sporting goods, which fell by 32% to 61,554 standard containers; furniture, bedding, and other household items, which fell by 30% to 260,070 standard containers; and textiles and textile products, which fell by 28.7% to 121,822 standard containers. This marks the eighth consecutive month of YoY contraction.

JMC cited data from the Journal of Commerce’s Port Import/Export Reporting Service (PIERS) to indicate that due to the inventory of many goods still being in the US, consumer goods have experienced a significant decline. The center also stated that it is necessary to closely monitor how stricter draft restrictions in the Panama Canal will affect freight rates and transportation.

Global Shipping Companies Under Pressure, Less Loss Equals Winning

The supply-demand imbalance in the shipping market has sounded an alarm, putting pressure on global shipping companies. Major container shipping companies saw their profits drop by over 60% YoY in the first quarter of this year, with Asian companies Evergreen and Yang Ming experiencing decreases of over 90%, and Wan Hai and PIL even suffering losses. European shipping companies Maersk and DFDS have released pessimistic outlooks.

Xie Zhijian, former chairman of Evergreen and Yang Ming, analyzed that for the past two years, the pandemic dividend allowed Asian shipping companies to earn the most. After the pandemic, the suppression of demand due to wars and inflation, as well as the sharp drop in freight rates, have severely affected Asian shipping companies. There are two key reasons for this: Asian shipping companies have shorter contracts, and global capacity allocation is uneven. With this year’s supply of shipping capacity exceeding demand by two to three times, Asian shipping companies on the East-West routes between Asia, the US, and Europe have suffered deeper price drops. More capacity is being squeezed into the spot market, and Asian shipping companies on the East-West routes are naturally more affected.

According to data, major container shipping companies worldwide saw a year-on-year decrease in net profit in the first quarter of this year, with a decrease of about 61% for Hapag-Lloyd, about 68% for Maersk, about 74% for COSCO Shipping, about 76% for ONE, about 94% for Yang Ming, and about 95% for Evergreen and Wan Hai, both of which turned losses.

Among them, Maersk, Yang Ming and others saw a decrease of less than 10% in container loading volume in the first quarter, but the average freight rates for Maersk decreased by 37% and for Yang Ming decreased by 60-70%. The reason for this is that European shipping companies have more north-south routes, while Asian shipping companies focus more on east-west routes. Since the second half of last year, the shipping market has been in a sharp decline, with a significant drop in freight rates for the Asia-US route.

The US CPI inflation rate in April decreased to 4.9%, with a 3.4% unemployment rate. In addition, a large amount of inventory was cleared in the first half of the year, and it is estimated that US imports will gradually improve in July and August, but they will still be estimated to decrease by 7% compared to the same period last year. However, Xie Zhijian pointed out that an increase in cargo volume does not mean that freight rates will rise, as there is a serious excess capacity.

According to the latest forecast by Alphaliner, the supply of shipping capacity will increase by 8.3% this year and demand will increase by 1.4%; next year, the supply will increase by 8.9% and demand will increase by 2.2%. A large number of new ships have been launched since this year, and the growth rate of shipping capacity in the next three years will be the highest in a single year.

Yang Ming pointed out that the global market is still shrouded in uncertainties such as war, inflation, interest rate hikes, and weak demand, coupled with an oversupply of shipping capacity, making the overall operating environment full of challenges such as supply-demand imbalances.

Xie Huiquan, the general manager of Evergreen, stated that in the process of returning to a normal shipping market, factors such as the Ukraine-Russia conflict, geopolitical tensions, interest rate hikes, and high inflation have caused the market to have a conservative outlook on the prospects of the container shipping industry. If the Ukraine-Russia conflict ceases, cargo volume in the second half of this year will be better than the first half, and freight rates will still depend on supply and demand.

Xie Zhijian revealed that this year’s long-term price in the United States is not high, only 20% to 30% of last year’s price, maintaining the pre-epidemic level, only slightly higher than the cost. Expecting traditional third-quarter peak season cargo volume to increase, coupled with reduced vessel capacity by shipping companies, less losses for more gains.


Source of news: Shipping Network, infringement deleted

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