Container Shipping Market (‘22/21W)

 The Shanghai Container Freight Index (SCFI) rose 14.86 points (0.36%) from the previous week to 4162.69 as of the 20th. It is the first time in 18 weeks since January 7th that SCFI has returned to an upward trend.

Earlier, the SCFI soared to a record high of 5,109.60 in early January, but declined for 17 consecutive weeks due to the Chinese New Year holiday and lockdown measures. Meanwhile, the index fell by about 1,000 points. However, this year's average SCFI was 4,581.45, which is still 20.8% higher than last year's average of 3,791.77.

 

1.     Weekly Market Briefings

• SCFI Composite Index 4,162.7 in 20 weeks of 22 years (5/16 ~ 5/20 days). SCFI rises 0.4% on the back of rising freights for Middle East routes.
  - The Shanghai blockade will be gradually reopened from May 16th after 50 days. If the number of confirmed cases continues to decline for the rest of May, the daily resumption target will be from June 1st.
  - As of May 9, the number of non-operational ships was 910,000 TEUs, accounting for about 3.6 percent of the total fleet. It is believed to be due to the continued decline in the freight market since the beginning of the year, and the size of non-operational ships will also change depending on whether the market recovers continuously

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

 

2-1. Europe :

 

European route rebounded slightly in 16 weeks
- According to Alphaliner during the continued congestion of major ports in Northern Europe, the European route schedule was delayed by an average of 20 days during the 5/1-15 period of major global shipping companies.
This is an increase from last December’s average of 17 days.
- The bottleneck of inland transportation is intensifying due to the lack of truckers, and the waiting time of ships is increased due to the lack of port workers and berths. In response, shipping companies are inevitably responding with some temporary cancellations
- Slowing the rotation speed of container boxes due to the blockade of China and the Russo-Woo war. Due to the low punctuality of carriers, the shortage of container boxes intensifies

 

2-2. USWC/USEC :

 

The route is the same as the previous week.
- Freights in the West Coast fell slightly this quarter as cargo was transferred to the East Port due to congestion at the West Port.
- On the other hand, the volume of cargo at the eastern port continued to increase, and the container throughput at the eastern New York New Jersey port recorded about 860,000 TEUs in March, an increase of 9.2 percent year-on-year. 

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 3.     Time Charter Rate

 

 Containership time-charter rates have remained high for the 12th straight week. As with the previous approach, as the high rate continues, there will be no sharp decline in freight rates going forward. However, despite the fact that the volume of cargo decreased due to the Russia-Ukraine war and the volume of cargo decreased due to the blockade of China is very clear, the fact that such a high rate is maintained is that shipping companies only ship 70-80% of laden, blank sailing, port skip. It seems that the freight rate defense factor is very large due to the supply control by shipping companies.

This seems to be a countermeasure due to the learning effect of shipping companies (in the early stages of covid-19, freight defense with blank sailing), and this strategy is expected to be very helpful to shipping companies' profitability.

Based on these reasons, I recommend the buy position for HMM (CODE: 011200) until the summer.

 

Ref ) Container Shipping Market (‘22/20W) (tistory.com)

Container Shipping Market (‘22/20W)

 

 

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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 to May 20, 2022, it has recorded 20 RSI units for 4 weeks in a row. 1) It turned upward after 18 weeks and 2) it is undervalued with an RSI of 30 or less. For a short-term approach, I recommend a Buy position.

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5.     Conclusion

 In the short term, there are factors for freight rates to rise, such as an increase in cargo volume following the lifting of the lockdown in Shanghai, the seasonal peak season start of the second quarter, and negotiations with the ILWU in the US, which will take effect from July. However, it is difficult to predict how various external factors will act.

Nevertheless, I expect the SCFI rate to continue to decline after a temporary rebound in the summer season.

Thanks.