In our latest Live Webcast on the development on container freight market between Asia and Northern Europe we investigated the price situation and the shortage of containers globally. Here follows a summary of the webcast from Jan 13, 2021.
Status on the Container freight market:
It continues to be turbulent on most markets. We still see an increase in price on trades between Asia and Northern Europe and this will probably continue until after the Chinese New Year in mid-February.
The Chinese New Year always means an increase in price per container and other problems. This year it may be even more challenging as it is a so-called "pandemic year”, and China is spreading the holiday so that Chinese families do not travel on the same days.
The cost for freight between base port to base port have skyrocketed. And then you should keep in mind that the cost of feeder and land transports, and other fees are not included.
The Shanghai Containerized Freight Index (SCFI) reflects the spot rates of Shanghai export container transport market. It includes both freight index (indices) of 13 individual shipping routes and a composite index and freight rates of individual shipping routes. The freight indices reflect the ocean freight and the associated seaborne surcharges of individual shipping routes on the spot market.
Why do we have a shortage of containers?
We see many causes: the pandemic, concerns about a trade war between the US and China, Brexit etc. In general, there is a higher demand for sea freight than there is access to ships and containers. As a result, there is a global shortage of containers. The carriers prioritize the markets and trade lanes where they make the most money, which has resulted in a lack of containers in the less prioritized trade lanes.
How should one act as an importer or exporter right now?
Carefully think through when it becomes business-critical not to get your goods home. Spread the risks. Work with more suppliers. More shipping companies, etc.
Keep an eye on the spot price market. However, we have seen that many spot products deny new customers or only offer their own solutions, which gives a one-sided picture.
Monitor developments closely. Do not sign up for the first best deal, or contract. Investigate and see what the agreement and contract would mean in practice. What risks do you take and are there additional fees to be added?
Review what your previous agreements were worth. Did you pay the actual agreed price? Did you get the goods home on time?
Will we see a stabilization on price after the Chinese New Year?
After the Chinese New Year, there will be a rush and a hurry to get rid of all goods that did not leave before the holidays. Due to the "pandemic year", many companies have already waited to send the goods out of China, which means that there are many shipments in the backlog.
The cost increase will slow down, and the only question is when and where the new price level will land. It is hard to predict. What happens, for example, if there are additional restrictions due to the pandemic? Port work is affected, and a shortage of capacity can arise and staff shortages, shortages of drivers and warehouse workers.
The price range for a 40-footer today is between 10, 000 and 12,000 thousand dollars. Even if that price were to be halved, we would land at a level much higher than normal for this period.
Would you think that a 50 % decrease in cost per container is enough?