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China Sea Freight Index Has Risen by More Than 12% In a Week

The container shipping market, which has been falling since last year, showed a significant "recovery" in March this year.

The freight rate of the Asia-Europe route took the lead in stabilizing and rising in March, and has been rising for 5 consecutive weeks. In early April, the freight rate of the trans-Pacific route began to rise slightly after continuing to bottom out. The phenomenon of empty container accumulation in container ports in the early stage has also improved significantly. Under the influence of port deployment and cargo volume recovery, port empty containers have decreased.

On April 14, the shipping sector of the Hong Kong stock market rose again, successfully recording 6 consecutive positives. Among them, SITC International (01308.HK) rose 4.17%, COSCO Shipping Energy (01138.HK) rose another 3.55%, OOCL(00316.HK) rose 2.7%, COSCO SHIPPING Holdings (01919.HK) rose 2.18%, COSCO Shipping Development (02866.HK) rose 1.96%.

Since the shipping demand is a derived demand of the economy, it is affected by the economic cycle and the production cycle of goods, and the shipping market is also a typical cyclical industry. From the perspective of seasonal short cycle, each type of ship has different seasonal characteristics because of the different cargo it transports.

In the past two years, the shipping market has continued to boom due to growth in foreign demand, the decline in ship turnover, port congestion, and poor logistics. Containers have become challenging to find, and freight rates have repeatedly hit new highs.

However, since the second half of last year, with the advancement of the global interest rate hike, the negative impact on consumption in various countries has begun to intensify, the purchasing power of overseas consumers has declined significantly, the demand for container transportation has shrunk, and the superimposed transportation capacity has gradually recovered. Container freight rates have begun to decrease.

In this regard, many people in the industry believe that the core contradiction in the current shipping market has not been resolved, and the room for freight rate recovery may be limited.

According to the data of the Shanghai Shipping Exchange, the average value of the Shanghai Export Container Freight Index (SCFI) in March was 915.9, down 6.6% month-on-month, and the decline continued to expand, down 80% compared to the same period last year.

In the first two months of this year, China's foreign trade exports were 506.30 billion yuan, a year-on-year decrease of 6.8%, a decrease of 3.1 percentage points compared with December. In March, China's PMI export order index fell from 52.4% in February to 50.4%, reflecting that the global trade cycle may still be under pressure and weak. The demand for commodities in the United States and Europe is generally weak, and they are still actively destocking.

Regarding the sustainability of the current recovery in demand in the shipping market, Yang Zhijian, executive director and general manager of COSCO SHIPPING Holdings, said that in 2023, the external environment will become more complex and severe. Geopolitical tensions, high inflation, and the tightening monetary policies adopted by European and American countries will continue to pose challenges to global economic development and commodity trade. In addition, the container shipping industry is not only facing long-term issues such as slowing demand growth, evolving trade patterns, and accelerating the decarbonization process, but also facing the realistic test of intensified competition in the industry and increased supply of shipping capacity.

The third quarter is the traditional peak season, and importers may resume part of the peak season stocking and replenishment operations. The container shipping market may reproduce the traditional low-peak season before the epidemic, and the market is looking forward to it.


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