Following on yesterday's "Shipping: Earnings Roundup (CMA CGM; Hapag-Lloyd; Maersk +++) Wow".
From Splash 24/7, June 7:
Where’s the ceiling for box shipping?
Alan Murphy, CEO and founder of Danish container shipping consultancy Sea-Intelligence, ponders how close we are to topping out in terms of today’s record freight rates.
The Shanghai Containerised Freight Index (SCFI) hit new highs on Friday. For many months now people have been questioning how much higher spot rates can go. It’s a tricky one, as there are so many unknown variables in play.
First, the obvious one. We are now so far into uncharted black swan territory that no-one speaks from a position based on experience, data, or models, we’re all just throwing stuff at the wall and seeing if anything might stick. A year ago – or anytime in the past 60 years of container shipping – anyone suggesting spot rates of $20,000 per feu would have been laughed out of the industry.
Secondly, there’s not enough empty containers and slots, so it’s a game of musical chairs, where the music is money. Shippers with low-value-to-volume goods are being crowded out by three other types of shippers: A) High-value shippers that have greater margins to eat into, B) shippers with goods with little to no friction in passing on the costs up through the supply chain, and C) shippers who are able to enforce their contracted space and equipment guarantees, although I hear they are referred to as unicorns in this market.
Another important stat to keep an eye on is the ratio of goods ready to ship versus placing new orders. If you have $500,000 in a box, but it is worth nothing in a yard in China and rapidly decreasing in value (fashion apparel, high-tech, seasonal products, automotive parts, perishables, pharmaceuticals, etc) you are willing to begrudgingly pay an awful lot of money to ship, if the alternative is spoilage or other type of massive value loss. On the other hand, if you are considering placing an order for 20 boxes of $500,000 of perishable goods, you will very likely consider whether you can postpone such an order, to a time of more reasonable freight. What is this ratio, no-one knows....
....MUCH MORE
