Container Shipping Market (‘22/18W)

 Global container shipping rates fell for the 15th week in a row. As the lockdown in Shanghai, China lasted for more than a month, it is analyzed that the amount of exports from China has decreased.

According to the shipping industry on the 30th, the Shanghai Container Freight Index (SCFI), a global shipping rate index, recorded 4,177.30 as of the 29th, down 18.68 points from the previous week.

After hitting an all-time high at 5,109.60 in early January of this year, it fell for 15 weeks in a row. It is the lowest level in nine months since the end of July last year (4,196.24).

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1.     Weekly Market Briefings

•  In the 17th week of 2022 (4.25-4.29), the SCFI Composite Index recorded ‘4,177.3p’. Weakness continued on most routes and fell for the 15th straight week.
  - Despite the recent decline for 15 consecutive weeks, the SCFI recorded an average of 4,851pt in the second quarter of '22.1, a new record high on a quarterly basis. Major global shipping companies are expected to achieve the highest earnings in the second quarter of ‘22.1 as high freight rates continue (quarterly).
  - The International Monetary Fund (IMF) forecasts the global economic growth rate this year to 3.6% (down 0.8%p from January). Prolonged supply chain problems and inflationary impacts are expected to negatively impact container trade.

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2.     Index Trend(Composite / Europe / USWC, USEC)

2-1. Europe :

• European routes fell for the 14th week in a row.
  - Germany's preliminary CPI (Consumer Price Index) for April reached an all-time high in 40 years (▲7.4% from the previous year). In particular, energy prices rose 35.3% from the previous month, and the rise in fuel prices due to war is having a negative impact on the eurozone economy as a whole.
  - In March, European route punctuality recorded 14.4% in Northern Europe (▼0.9%p MoM, ▼10.1%p YoY) and 30.6% in Mediterranean Sea (▲3.6%p MoM, ▼0.8%p YoY). The Russia war caused a drop in productivity at major European ports, and the index fell year-on-year.

 2-2. USWC/USEC :

• US West Coast rises slightly, East Coast routes remain weak.
  - The US GDP growth rate in the first quarter was -1.4%, the first negative growth in six quarters. In the aftermath of austerity measures due to inflation, it fell sharply compared to the previous quarter (6.9%).
  - The US Federal Reserve (FRB) is expected to implement stronger austerity measures, and further interest rate hikes(0.5 percentage points in May and 0.75 percentage points in June) are expected to be discussed at the upcoming FOMC meeting in May.

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 3.     Time Charter Rate

 Containership time-charter rates have mostly maintained their current high level with no change for 9 consecutive weeks. Let's examine the impact of rising/falling container freight rates in 2H. The decline is due to the decrease in the volume of cargo due to the economic slowdown caused by the global economic downturn, while the uptrend is that 1) container freight rates, which have continued to decline, have come down far enough to further fall, 2) ILWU issue, and 3) Containership time. -Considering that charter rates remain at a very high level, 4) US West/East freight rates are still high, and 5) China's corona lockdown is over sometime, temporarily pouring out volumes, container freight rates will rise in the second half of the year. For this reason, I recommend a container shipping company such as Korea's HMM (CODE: 011200, as of 5/2: 28,950 KRW) to invest it.

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4.     Technical analysis

MACD : October 08, 2021, Trade signal (Short Position establishment) signal occurred. So far, a strategy to maintain a short position seems necessary.

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5.     Conclusion

 In my opinion, I do not anticipate a prolonged weakening of sea freight rates. This is because, after the lockdown is lifted, the resumption of the Shanghai factory may cause a sudden influx of traffic, which could lead to a rise in shipping rates. In particular, given that the second quarter is a peak season when the volume of traffic increases, some think that the logistics turmoil that occurred in China after the lifting of the COVID-19 shutdown in the second half of 2020 could be repeated.

Thanks.