Container Shipping Market (‘22/30W)

 The global container freight rate index (SCFI) fell for the sixth straight week, dropping below 4,000 points for the first time in a year.
 The Shanghai Container Freight Index (SCFI), a global shipping rate indicator, recorded 3,996.77, down 77.93 points from the 15th. It has been about a year since it first crossed 4,000 at 4054.42 on July 16 last year.

SCFI started downward on January 14th, and after a brief rebound at the end of May, it has continued to decline again from mid-June.

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1.     Weekly Market Briefings

 In '22, 29 weeks (7.18~7.22), the SCFI Composite Index recorded ‘3,997p’. SCFI fell for 6 weeks in a row, under 4,000pt for the first time in a year since July '21.
- China's economic growth rate recorded 0.4% in the second quarter, the lowest since the first quarter of 2020. The main reason is the lockdown measures implemented in major cities due to COVID-19. In particular, the growth rate in the second quarter of Shanghai was -13.7%.
- Although the economy is recovering after the lockdown was lifted in June, there are uncertainties about economic growth in China in the second half of the year due to internal and external adverse factors such as the re-spread of Corona 19 and global inflation.

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

 

 2-1. Europe :

 European routes fall for eight weeks in a row.
- Eurozone inflation pressure continues and freight rates continue to weaken.
- The European Central Bank took a big step in raising the base rate by 0.5%p in response to inflation. Interest rate hike for the first time in 11 years, negative interest rate policy ends.
- The decline in freight volume is expected to continue for the time being as consumer sentiment in Europe has contracted

 

2-2. USWC/USEC :

 West Coast of the US fell for 10 consecutive weeks, and East Coast routes also fell for 9 weeks in a row.
- Inflation and austerity policies continue, and freight rates continue to weaken.
- Continued eastern movement of cargo. In the first half of the year, the port of South Carolina, in the southeastern United States, to which the Port of Charleston belongs, saw a 12% increase in container throughput compared to the same period last year.
- Accordingly, the Port Authority is trying to improve the supply chain by giving priority to berthing ships with heavy cargo, improving the railroad residence time, renting additional chassis, hiring additional personnel, and investing in port infrastructure.

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3.     Time Charter Rate

  Looking at the data as of 7/15, it can be seen that the charter rate decreased in most periods/linearities. The decline is occurring first in small and medium-sized vessels (6,800TEU) rather than large vessels (9,000TEU).

 This is because it is not easy to change the input of ships on key routes where most of the large ships are used, and the Asia-Americas routes, where a lot of 9,000 TEU class is still used, are active. However, looking at the recent downward trend in SCFI movements, it is expected that the charter rate will plummet in the near future, and freight rates are also expected to decline at a steeper pace.

 

 Ref ) Container Shipping Market (‘22/28W) (tistory.com)

 

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 4.     Forecasting

 4-1. ARIMA, Time series analysis

 For the SCFI index forecast, I used weekly data (640 pieces) from October 16, 2009 to July 22, 2022 to predict the future freight for three weeks.

Date	Forecast	Trend(WoW)
‘22/30W(7/25~29)	3,970.500	↘
‘22/31W(8/1~5)	3,950.294	↘
‘22/32W(8/8~12)	3,938.664	↘

 

 As shown in the table and figure above, the SCFI (as of 7/22: 3,996.77) fell by -1.91% compared to last week (as of 7/15: 4,074.70). The sixth straight week of decline is significant, but more importantly, the SCFI fell below 4000 points in one year.

 There is a psychological line in all indices (numbers), the 4,000 point collapse means that the decline in the macro side can no longer be overlooked, despite several defensive measures (Blank Sailng) on the shipping side. 4,000 points, once broken, will not be easy to recover in a short period of time.

The results of the ARIMA analysis model also predicted that the SCFI will continue to decline over the next three weeks.

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4-2. Technical analysis

MACD : October 08, 2021, Trade signal (Short Position establishment) signal occurred. The width of the histogram, which was gradually decreasing, increased again as of July 22. This seems to reflect the effect that the decline was larger than the recent average. The trend reversal in SCFI is unlikely to occur.

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5.     Conclusion

 Supply chain problems such as stagnation in ship operations are still present, but despite concerns about an economic slowdown caused by inflation and austerity, container ship freight rates are expected to continue to weaken as demand declines.

  Shipping analysis company MSI expects this trend to continue, and predicts that freight rates will be set at less than half of the current level by 2024.

 

Thanks.