The cost of shipping goods from China has slumped to the lowest level in more than two years as the world economy stumbles, dimming prospects for container carriers that turned in record profits during the pandemic, reports Yahoo News.
Symptom of multiple headwinds
A 40-foot shipping box from the world’s largest port of Shanghai to Los Angeles fetched $3,779 last week, the first time the spot price was below $4,000 since September 2020 and half the level of three months ago, according to Drewry. More declines are expected in the next few weeks, it said.
While the value of Chinese exports was still rising through August, it’s expected to continue to slow down. That’s a symptom of multiple headwinds hitting developed and developing economies alike, from soaring inflation and a surging dollar to central bank interest-rate hikes and trade disruptions blamed on Russia’s war in Ukraine.
“It’s fair to say that the demand outlook for the trans-Pacific and container shipping generally is receding quickly,” said Simon Heaney, a senior manager of container research at Drewry.
In what’s typically the peak season for seaborne trade, global demand for Chinese goods is waning instead as consumers cut back spending because of inflation and the shift away from goods toward services.
Factories scaling back production
Factories in Europe and the rest of Asia are also scaling back production. China’s economic slowdown is also cutting into import demand, with companies in Asia and Europe seeing weaker growth or declines in orders from Chinese companies.
For the world’s shipping lines, it’s providing some relief to their packed sailing schedules yet threatening to slow an eye-popping run of profitability driven during the pandemic by stronger-than-normal consumer demand for household items.
“While it’s more clear that the second quarter of 2022 will be an earnings peak, I think any talk of bust and return to pre-pandemic earnings levels — or lack thereof — is premature,” said John McCown, an industry veteran and founder of Blue Alpha Capital.
Shares hit low
Shares of Copenhagen-based A.P. Moller-Maersk A/S hit the lowest since March 2021 on Friday, and Germany’s Hapag-Lloyd AG slumped to the lowest since June last year. Cosco Shipping Holdings Co., China’s biggest carrier, reached a 17-month low. Shares of Honolulu-based Matson Inc., a smaller player that has operated an express Asia-to-US service across the Pacific, are worth about half of their record high set in March.
It was just about two years ago that US import demand started to surge, leading to a queue of cargo ships off the coast of Southern California through 2021 that eventually reached a high of 109 in January this year. As of Friday, the line to enter the ports of Los Angeles and Long Beach had eight vessels.
US container imports aren’t falling off a cliff, but they’re slowing down to more normal levels seen before Covid-19.
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Source: Yahoo News
