Container Shipping Market (‘22/20W)

 Global container shipping rates fell for the 17th week in a row. However, routes to the Middle East jumped more than $100, partially recovering from the decline. According to the shipping industry on the 15th, the Shanghai Container Freight Index (SCFI), a global shipping rate index, recorded 4,147.83 as of the 13th, down 15.91 points from the previous week.

After hitting an all-time high of 5,109.60 in early January of this year, it fell for the 17th week in a row. It is the lowest level in nine and a half months since the end of July last year (4,196.24).

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1.     Weekly Market Briefings

•  In the 19th week of 2022 (5.9-5.13), the SCFI Composite Index recorded ‘4,147.8p’. Freight rates continue to weaken amid sluggish global demand, SCFI declines for 17 consecutive weeks.
  - In March, global container traffic recorded about 15 million TEU, down 2.9% from the same period of the previous year. Container traffic volume in the second quarter of ‘22.1 was about 42 million TEU, a decrease of 1.8% compared to the same period of the previous year.
  - Major global alliances plan to expand blank sailings during the 17th to 23rd weeks to respond to the decrease in demand due to the blockade of Chinese cities.
  - A major global shipping company's 1Q earnings record highs due to a rise in contract freight rates. Despite the recent drop in spot rates, it is expected to maintain a high level of sales in the second quarter.

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

2-1. Europe :

•  European routes fell for 16 weeks in a row.
  - As freight rates continue to decline due to shrinking demand from China, major shipping companies are extending their existing freight rates until the second half of May.
  - Container traffic volume at European ports reached 5.46 million TEU in March, up 10.4% from the previous month, recording the first increase since ‘22. However, compared to the same period of the previous year, it still decreased by 7.1%, and the volume of cargo volume in the second quarter of ‘22.1 decreased by 2.8% compared to the same period of the previous year.

 2-2. USWC/USEC :

• US West Coast, slightly rising compared to the previous week, and showing strong momentum, while the East Coast route declined for 4 weeks in a row.
  - Due to the US government's move to strengthen regulations, major shipping companies are holding back additional freight rate hikes.
  - Official negotiations started (5.12) ahead of the expiry of the labor-management agreement on the western port of the United States in July of this year. Whether there is a strike/sabotage of the port workers is the key to the direction of freight rates on North American routes.
  - In response to the decrease in cargo volume due to the blockade of China, shipping companies have adjusted their capacity through temporary cancellations and are maintaining high freight rates on the US West Coast route.

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 3.     Time Charter Rate

 Containership time-charter rates have remained high for the 11th straight week. This can be used as evidence that freight rates will not drop sharply in the future due to high rates. However, if we take a slightly different view, it may not be easy for the charter rate to rise any longer. In other words, if the peak recognition approach is used, the time charter rate may also drop sharply when freight rates drop in the future.

HMM (CODE: 011200) has been on a downward trend since the earnings announcement, but considering that US routes are still high, this year's earnings are also expected to be very good. Considering that there are still more signals for freight rates to rise rather than decline, I recommend a mid- to long-term buy position.

Ref) Container Shipping Market (‘22/19W) (tistory.com)

Container Shipping Market (‘22/19W)

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4.     Technical analysis

MACD : October 08, 2021, Trade signal (Short Position establishment) signal occurred.

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RSI: From April 29, 2022, it has recorded around 20 index for three weeks in a row. In the mid/long term, the downtrend is still true, but considering the 17th consecutive week of decline, it appears to be sufficiently undervalued. Therefore, according to the RSI, I recommend a Buy position for a short-term approach.

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5.     Conclusion

 Despite the various issues, if the Shanghai lockdown, which everyone is aware of, is lifted soon, it will definitely increase freight rates in terms of cargo volume. However, the key is how much impact the US interest rate hike will have on the global economic downturn in the future.

 

Thanks.