- According to analytical agency Xeneta, long-term contracted ocean freight rates, as the cost of securing container shipments climbed by 10.1% in June 2022.
- Taking into account the energy crisis in Europe and new COVID cases, Chinese lockdowns and the current geopolitical conflict, the demand for container shipping can really decrease.
- However, the draft document features some unclarity.
As of right now, geopolitics and the ongoing epidemic are the main sources of uncertainty in international trade. The former implies a shift in logistics on a worldwide scale, while the latter involves unexpected lockdowns caused by the shutdown of the biggest factories and ports, like Shanghai as reported by Port News.
In the container segment, long-term shipping rates exceeded spot rates amid that uncertainty.
Xeneta CEO Patrik Berglund says the falling spot rates may increasingly tempt shippers away from traditional contracts – in addition to looming industrial action in ports (in Europe and, potentially, the US) that could further damage schedule reliability only just recovering from recent congestion and COVID-induced disruption.
China’s Containerized Freight Index has decreased from about 5,800 at the beginning of the year to 5,000.
Meanwhile, some cargo shippers acquire their own fleets.
This trend can entail long-term consequences for line operators.
Freight rates for VLCC showed a record low fall to -$16,000 (and once too -$19,000) per day and the companies had to work with no profit counting on the situation to improve.
In June, the rates rose a little but they are still negative at about -$7,000 per day.
However, there is some good news for tanker fleet operators.
According to analysts of Xclusiv, prerequisites for growth in the tanker segment have developed as new trading routes are created amid the sanctions: crude flows from Russia to Asia and from the Middle East and Africa to the Western countries.
The shift towards other suppliers creates additional demand for tankers and adds more ton-miles to the oil trading that significantly supports the wetsector.
Bulkers’ freight prices are at their average level for the past two years. With no significant increase in demand in the Atlantic or Pacific basins, the rates have been gently falling since May. By the end of June 2022, the Baltic Dry Index (BDI) had reached a peak of 2,389.
However, as a result of the situation in Ukraine and the disruption to the supply of grains and fertilisers, both their prices and the need for their shipping are rising globally. Even more so because Russia has committed to exporting necessary amounts of grain this season while negotiations are taking place to address the shipment of grain from Ukraine.
The increase in bunker prices follows the growth of crude oil prices.
However, ‘abnormal’ fluctuations in prices are registered in this segment.
VLSFO and HSFO prices at Singapore, the largest bunkering hub in Asia, have been showing mixed dynamics for the first time over a long period of time.
From March 2022, VLSFO price rose from about $800 to $1100 pmt, while HSFO fell from about $750 to $600.
Perhaps, that is due to the situation in the refining market and to the shift of crude supplies from the Middle East and Russia.
What about Russia?
As of today, Russia desperately needs additional ships, especially for the transportation of the dry bulk cargo and containers in the Far East basin.
Meanwhile, FESCO says the cost of container ships has increased by 6-7 times in 2022.
However, the draft document features some unclarity.
Subsidies are to be limited by the budget, which can be not sufficient for all applicants.
Nevertheless, the very fact of developments towards such a measure is encouraging.
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Source: Port News