The cost of transporting a container by ship (freight) has tripled since the extreme confinement in Europe was lifted and, despite the crisis, the market rules out seeing the low prices that helped the economy recover for a long time and international trade after the crash of 2009, .
According to the Shanghai Index (SCFI), freight is around $2,900 for twenty-foot containers (TEUS), which is almost triple the $1,000 registered in the first week of January 2020 and 3.6 times more. than the minimum of 800 dollars in mid-April of last year when, in the midst of the closure of the Western economy, shipping companies began to stop ships. The forty-foot container, a benchmark in the US, is around $5,200 compared to $1,800 at the beginning of last year.
Traffic falls due to lack of capacity, which is concentrated in China, and planes and trains with Asia grow
After a sustained rise since June, the indices have practically stabilized since Christmas Eve, leaving the range of between 450 and 1,100 dollars per TEU container registered between 2015 and the beginning of 2020 far away and putting an end to an era of low prices that It promoted transport by ship, which is less polluting in terms of CO2 emissions, and imports, mainly from Asia, which was consolidated as the factory for Europe and the US.
“There is a consensus in the market that freight rates are not going to return to the prices they were before the pandemic, which helped so much to recover international trade and the economy after the 2009 crisis. They have stabilized for a few weeks and although a decrease is expected after the Chinese New Year (February 12) due to the greater capacity, low prices will never return”, explains Nuria Lacaci, general secretary of the Association of Shippers of Spain, who sees how the obstacles to dedicating herself to importing and export since the coronavirus broke out.
“There is a consensus in the market that freight rates will not return to the prices they were before the pandemic, which helped so much to recover international trade and the economy”
Sources from the port sector agree that “it does not look like freight prices are going to fall in the medium term because there is an excess of stock in China that has to leave and there is a lack of capacity. There is a bottleneck at origin and destination” . These same sources explain that, in addition to containers, the cost of transporting solid bulk by sea (cereals, grain…) is also rising due to the strong concentration of demand in China. Although the price of bulk carriers has a more volatile behavior than the SCFI, between the end of May and the first week of July, the cost quadrupled from 477 dollars to the maximum of 1,956 dollars, a record that was broken on October 6 upon arrival at $2,097. , the dry bulk ocean freight index, has moderated to $1,339, implying that it is in the low range of the new normal price range, which has been between $1,150 and $2,000 since the end of the first wave.
“It doesn’t look like freight prices are going to fall in the medium term because there is an excess of stock in China that has to go out and there is a lack of capacity”
Port sources explain that the increase in prices responds to a sharp rise in demand for solid bulk from China. The Asian giant closed in February losing large cereal and grain contracts, which represented an opportunity for Europe. Once the commercial doors were reopened to the world, the Asian giant made sales to recover customers and offered stable prices for three or five years, when it is normal to close agreements for 18 months.
Thus, it has won many very long-term contracts that it has to be able to serve the world, which has led Chinese companies to concentrate capacity, even paying ships to return empty, leaving Europe and America without space to move goods. “The capacity has been concentrated in China and the returns are made empty. The normal thing before the pandemic is that when the ship arrived in Europe and unloaded in Algeciras or Valencia, they went around to pick up cargo and return to China full, making stops. Now they come rushing back to Asia,” explain port and shipper sources.
The same thing has happened with containers, since there has been a sharp increase in demand for online commerce, which largely comes directly from China and has risen by more than 20%. Lacaci points out, in turn, that there is a lack of containers in the market to cover all the demand and that for many months the shipping companies reduced capacity, impacting international merchandise traffic and inflating prices.
Spanish imports by sea from China and Hong Kong have risen for the first time in November
In the final stretch of the year, all the capacity was put back on the market, a fact that has been noted in that, for example, , closing the year with a slight decrease of -0.29% , and that Spanish imports via shipping from China and Hong Kong have risen for the first time in November compared to the same month of 2019, both in tons and in millions of euros. Container traffic in Spain in import-export has also risen in December (6%), although in the year it accumulates a decrease of 8.13%, with small ports being the most affected. For their part, solid bulks have not raised their heads and have closed the year with a 15% drop, Valencia and Ferrol being the most damaged.
Congestion in 2021
The increase in capacity has not yet been felt in the activity, as there are still problems of space and high prices. According to the BDP consultancy, the demand with origin and destination Asia Pacific has “exceeded the available capacity” and it is impossible to get space in the ships before March. Thus, the firm recommends reserving capacity with five or six weeks to guarantee space in the boats if you want to take a product from Europe to Asia. In the opposite direction, from Asia to Europe, BDP recalls that “space is very limited” because it recommends pre-booking between six and eight weeks. Advance notice to which must be added the three-four weeks it takes for the ship to arrive in Europe.
Companies ask to reserve space on ships with eight weeks for routes from Asia
There are also capacity problems on the routes between Europe and North America and Latin America, where it is recommended to book with more than a month, and between the New Continent and Asia, where there are not enough ships. But where Asia’s need to hoard capacity is really being felt is in the Middle East, Turkey and Africa, where shipping lines bound for Southeast Asia and the main Chinese ports do not accept cargo. “The shipping companies are placing empty containers. Some transports do not accept reservations for the Far East and only fill the capacity with an empty position,” explains BDP about the situation of the routes from the Middle East and Turkey to China.
“Shipping companies are placing empty containers. Some transports do not accept reservations for the Far East and only fill capacity with empty positioning”
From Mærsk, a global leader in maritime transport, they see this rise in freight prices as something natural. “The reason why freight rates have risen so dramatically is simply because there has been more demand than supply,” they say from the company in statements to Bloomberg. At this point, the Danish firm also points to business interruptions due to the pandemic as one of the causes of the rise in prices, interruptions that they expect to begin to relax after the first quarter of 2021. Likewise, the consultancy BDP International expects that relax capacity tensions in maritime trade from March or April due to an increase in containers.
Although an improvement in capacity and a reduction in times are expected, strong corrections in freight prices are not expected, an opportunity that Spanish shipping companies and smaller ones are taking advantage of to gain a foothold on intra-European routes or with the North from Africa, since they offer lower prices than the big shipping companies. Of course, capacity is so concentrated in a few actors that it has no global reflection.
Inflation?
At the moment, the high costs and the lack of capacity have impacted the times in the industry, which take longer to receive orders and the deadlines have been extended, but prices have not yet been noticed because the increase has been absorbed prices while waiting for the situation to normalize. Something that does not look like it is going to happen and that is already leading companies to bring production from Asia to North Africa. During the pandemic, the industry realized that suppliers were far away and the context of world trade is accelerating the decision.
Along these lines, according to the data handled by Allianz and Berenberg, companies are reducing margins instead of increasing prices. However, with the arrival of the economic recovery, firms could begin to transfer these costs to consumers, contributing their grain of sand to an inflation that could exceed 2 and 3% during this 2021. “The growing demand for products from China, the shortage of containers and the strengthening of the yuan boost the prices of imports to Europe”, explains Allianz.
Impact on trade in Spain
The pandemic and the lack of capacity have had a strong impact on international trade between Spain and China. According to data published by the Ministry of Industry, our country imported 4,555,170 tons by sea from the Asian giant, including Hong Kong, up to November 2020, which implies a decrease of 9.4% compared to the same period in 2019. These imports totaled 16,815 million euros, 11.4% less than the 18,995 million a year earlier. Every month they have been down except November, when some 80,904 tons were moved. Ship exports to China rose slightly.
Imports from China to Spain by train and plane have skyrocketed in 2020 while they fall by sea
In parallel, the use of planes and trains to move goods between China and Spain has skyrocketed between January and November, registering increases even in the last months of the year, and . Thus, 77,567 tons of goods have arrived in Spain from China by air up to November, 17% more. The increase is greater if it is measured in euros since goods have been brought in for 5,000 million, 52% more. Imports from China by train have multiplied by eleven, from 36.6 million in 2019 to 429 million in 2020, while exports have moved 37 million more.
Globally, the impact of the pandemic has also been felt. According to data published by the Ministry of Industry, Spanish imports have moved 250,760 million euros between January and November, 15.8% less than the same period in 2019. Exports, due to their…
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