Introduction of container ships ② Focusing on SCFI index, trade volume between routes, and Alliance

Let's start the second chapter of the container ship. Let's talk about SCFI, a representative freight index, introduction of major sea routes, cargo volume, and alliance system.

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1. Composition of SCFI

 

If the BDI introduced in the last article is the benchmark index for bulk carriers, SCFI can be viewed as the benchmark index for container ships. Of course, in addition to SCFI, there are CCFI, WCI, and KCCI (Korean Shipping Rate Index), but SCFI is still the most used to see spot rates.

SCFI is announced on the Shanghai Shipping Exchange, and it is also announced as a comprehensive freight rate index reflecting the spot fares of 15 major routes departing from Shanghai.

 

https://en.sse.net.cn/indices/scfinew.jsp

If you access the Shanghai Shipping Exchange, you can check the comprehensive freight rate index and the weights of the 15 major routes.

To briefly explain the characteristics, the main shipping unit is USD/TEU, and USD/FEU is applied to the East and West Coasts of the United States.

 

 

SCFI fares include most incidental costs, but do not include THC (Terminal Handling Charge), which is the cost of transporting containers from the side of the main ship until passing through CY, and security surcharges in port facilities.

Please note that the SCFI Index is published every Friday at 15:00 (Beijing time).

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2. Trends in 2023 cargo volume by major routes

 

Let's take a look at the main routes used by container ships and the trend of expected cargo volume this year.

Main lane, which means East-West route, is a trade route between North America, Europe and Asia located at the top of the picture. East Bound volume from Asia to North America is expected to be 20.3M teu, West Bound volume from Asia to Europe is 14.6M teu, and West Bound volume from Europe to North America is expected to be 5.3M teu. Conversely, the trade volume of the East-West route, including the return trade volume, is about 55.9M teu, which accounts for about 30% of the total container trade volume.

 

Intra-Asia routes within the region where small vessels are mainly used have an estimated volume of 63.8M TEU this year, accounting for about 33% of the total container volume. India-centric routes also account for 21.8M teu.

 

I hope that the above figure will help you understand the movement of the overall container route and cargo volume.

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3. Market Share by Alliance

 

Container shipping companies seek to maximize profit and stable fleet operation by diversifying service routes while jointly sharing ships and routes. As part of this, an alliance is formed between shipping companies, but monopoly activities such as jointly determining freight rates are prohibited.

Let's take a look at how the recent merger between shipping companies has taken place.

 

• ONE : MOL, K-Line, NYK container ship division integrator
• OOCL: merged with COSCO
• USAC: merged with Hapag-LIoyd

 

However, the capacity of the three major alliances (THE, Ocean, 2M) occupies 85% of all container ships, and there are concerns that they are going to an oligopoly system.

 

Amid these concerns, news that shocked the market came the day before. That article is the news that 2M, an alliance between MSC, which ranks first in terms of fleet capacity, and Maersk, which ranks second, has decided to disband. It was officially announced that it would be disbanded in January 2025, and there is also an article that the pressure from the US Maritime Commission (FMC) was the cause, and Maersk broke up due to damage caused by loss of competitiveness / leakage, such as going to MSC's CEO. There are rumors that it has been decided. Personally, the rumors seem a little more convincing. For example, after 2M, MSC has become the world's No. 1 shipping company in terms of tonnage in January 2022, overtaking the leading Maersk through aggressive ship orders.

 

Additionally, we'll have to keep a close eye on how 2M's changes affect other alliances as well.

 

thank you