The Risk Of Global Supply Chain Increases! The Cost Of Europe Will Soar.

Xeneta Shipping Market Analysis platform, headquartered in Oslo, Norway, recently warned that the current freight rates in the container shipping market are subsidizing shipping companies to ship goods around the world, and it is expected that ship operating costs will continue to rise next year. Large container shipping companies will not allow this situation to continue and will certainly take action, thus increasing the risk of the global supply chain.

For such an assessment, senior executives of the shipping industry pointed out that it is already clear that the biggest increase in operating growth next year will be on the European line, where the EU will implement an emissions trading scheme (EU ETS) and begin to collect carbon taxes; the Suez Canal will raise tolls by 5-15%; Hamburg port in Germany will increase port fees by 6.5%; and various costs are rising because of inflation.

However, the European route is the route with the largest increase in new ship capacity next year, and it is also the route with seriously low freight rates at present. At present, most of the new fuel ships under construction are super large container ships of more than 15000 container class, and most of these ships are only suitable for sailing in Europe. When the transport capacity continues to be surplus and the freight rate is already significantly lower than the cost price, large container ship companies are bound to make a difference.

Patrik Berglund, chief executive of Xeneta, said global long-term freight rates were cut by nearly 60 per cent in 2023, with short-term and long-term freight rates falling by about 80 per cent across the Atlantic to the east coast of the US and from the far East to Europe. Freight is so low that container shipping companies are actually subsidizing companies to ship goods around the world.

Berglund believes that large container shipping companies will not allow this to continue and will try to push up freight rates, and shippers who sign long-term contracts at lower prices may be the first to be affected when the market turns. For unprofitable offers, shipping companies will seize every opportunity not to transport these customers' containers.

Industry executives believe that Xeneta's assessment is not without reason. Apart from reducing shifts and reducing cabins to depress supply, the recovery of the electronics industry next year has seen light, and if the international situation slows down in the second quarter of next year, it is expected to accelerate growth. If the conflict between Russia and Ukraine ends next year, there is likely to be a major reversal in the container shipping market, post-war reconstruction of goods and materials, a reduction in energy prices, an increase in consumer confidence in Europe, an improvement in the economy, and so on. At that time, the current low freight rates are expected to rebound sharply.

At present, the freight rate of the European route is already lower than the cost price, and the freight rate of each large container (40-foot cabinet) is only US $750-800, while the shipping company of the European route sailing with the largest 24000 containers is estimated to cost about US $1000 per carton, and for container ships of about 8500 cartons, the cost price will rise to about US $1500.

At present, the major shipping companies have planned to raise the freight rates for European routes on November 1, with an expected increase of about US $1,000 per carton. The more optimistic freight forwarders in the market are expected to have the opportunity to increase by US $600 to US $700, and some people in the industry think that they can increase by about US $500. However, they all believe that the freight rates after the increase will not be long-lasting and may fall again soon.