Text | Edited by Pan Xiaoyu
| Peng Xiaoqiu
Everything is a cycle, especially shipping. Shipping under the
epidemic has provided many people with an epic opportunity to get rich: a container that originally cost 1,500 US dollars can be sold for 30,000 to 40,000 US dollars during the epidemic. The cross-border seller of the account sold the house to the freight forwarder in 2021." The performance of the
secondary market is even crazier. For example, last year's big bull stock COSCO Shipping Holdings had a net profit of 89.3 billion in 2021, and Q1 in 2022 still maintained a growth rate of 78.6% (that is, 27.6 billion); times, Yangming Shipping has skyrocketed by 46 times, and China United Shipping also submitted the prospectus last year, no matter how you look at it, this is a big year for shipping .
However, when many people in the industry are looking forward to how to spend their money, shipping has ushered in a cliff-like decline, shattering this dream of getting rich.
Usually Q3 is the traditional peak season for global shipping, but this year's Q3 is particularly bleak. Last year, a US$20,000 container on the US-West route has now dropped back to US$3,000; many freight forwarding companies have begun to be exposed to negative news such as thunderstorms and running away.
The FBX index, which reflects the price trend of bulk dry bulk cargo, had an average price of US$3,369 as of October 21, a drop of 70% from the historical high in September last year. More than that, along with the delivery of nearly 2.4 million TEUs of new ship capacity in 2023, this cyclical curve with huge ups and downs seems to be still spreading .
If the shipping cycle is drawn as a solid line, then the two big hands of supply and demand move the line on both sides. Looking at it this way, it seems that the cycle of shipping can be understood, but although the general direction is good, every cycle of reincarnation cannot avoid the black swan events interspersed in it.
The reincarnation of bankruptcy and sudden wealth
If you want to understand the cycle, you have to trace the source from container transportation.
In 1957, with the sound of a horn, the world's first refitted container ship, Gateway City, slowly sailed into the Atlantic Ocean , opening a new chapter in the history of human shipping prelude. The newness of
here is mainly reflected in the impact of containers on the global logistics system: in order to adapt to the application of containers, has formed a set of containers suitable for various units such as yards, docks, lifting, ships, automobiles, roads, bridges, and tunnels. standardized transport system.
Although at the beginning of the birth of the container, the executives of the shipping company were not optimistic about this business, and even thought that it would not be time to use the container in the next ten years. However, in 1961, ISO, the International Organization for Standardization (ISO, ) began to discuss the development of standard container sizes, and the advantages of container transportation were gradually recognized by people, and the international container transportation dominated by sea transportation entered a stage of rapid development.
ISO container (20 feet, 40 feet, 40 feet) size, map source China Merchants Futures
In 1965, six shipping companies announced that they would start container business to Europe in the next year; in 1969, Dong Haoyun formally established " Orient Overseas The container shipping company ” changed 7 old ships into container ships, and then bought 7 new ships from Japanese shipyards; in the same year, the United States also built 25 container ships, the largest one with a loading capacity of nearly 2,000 TEU; in 1975, China The container ship "Changchun Ship" of Taiwan's Evergreen Shipping sailed from Taiwan, China to the east coast of the United States.
Shipping companies were shifting quickly to container shipping, while the other end global economy also began to accelerate in 1972. From 1971 to 1973, the global container tonnage nearly doubled.
More than that, the economic prosperity continues to blow out new bubbles: In 1973, the price of crude oil soared, and the cost advantage of container transportation was further reflected. In this year alone, the volume of global containerized goods increased by 40%. The gap between supply and demand widened rapidly, and major shipping associations raised prices hundreds of times in a row. Soaring freight rates have alsoThe profit of the shipping company rolled over several times. In 1973, the profit of the sea-land combined transport company was only 16 million US dollars, but it rose to 142 million US dollars in the second year.
Sea container shipping seems to have ushered in a prosperous and prosperous era, but a crisis is quietly brewing in it. In order not to be squeezed out of the market, once a certain shipping company introduces containers on a specific route, other competitors will quickly follow up with . Therefore, capacity has grown slowly and imperceptibly at a high speed. From 1968 to 1974, capacity on those international routes with the largest cargo volumes increased 14-fold. The bursting of the
bubble is now. Freight rates due to oil were finally dragged to the bottom by oil crisis, in 1974 central banks of various countries tightened monetary policies to offset the inflationary results of rising oil prices, the world economy fell into recession, in 1975, The value of maritime trade decreased by 6%. The sharp decline in shipments, coupled with the fact that the inertia of shipping capacity growth has not stopped, and the inversion of supply and demand has forced major shipping associations to cut prices more than 600 times, and freight rates have reached the bottom of the cycle.
Since then, with the recovery of the world economy, the sluggish shipping has also begun to recover. After a brief respite, the shipping companies once again invested in a new round of arms race, and shipping ushered in a short-lived prosperous period.
Until 1985, this time it was oil. Oil prices did not rise from US$28 to US$50 per barrel as predicted by the shipping giants, but plummeted in half to US$14. Global shipping is in for one of its biggest meltdowns yet.
In 1986, the American Steamship Company founded by "Father of Containers" McClain declared bankruptcy, which was also the most chaotic bankruptcy case in American history. As mortgage assets, 52 cargo ships of the American Steamship Company were detained in the hands of many ports around the world, and then sold to sea-land transport companies at a low price.
The cycle of ups and downs in shipping until now, from the 1980s to the present, every ups and downs of shipping is accompanied by obvious economic fluctuations. For example, taking the 2008 financial crisis that swept the world as an example, container shipping ushered in an inflection point of slowing growth. Since then, fluctuations in freight rates and shortened cycles have become the norm, and excess capacity has become the biggest theme of shipping after 2008.
What will save you, my cycle?
From the birth of the container to the present, the shipping cycle has repeatedly performed the cruel Darwin law in the ocean. From the bankruptcy of the American steamship company in an instant under the cycle, to the ship king Dong Haoyun's OOCL being insolvent and on the verge of bankruptcy under the shipping collapse. No one can escape the "curse" of the cycle, and shipping companies can only try their best to find ways to resist risks before the next cycle comes.
When the cycle is at the bottom, the freight rate tends to drop again and again, so that the shipping company can barely earn back operating costs. So when freight rates collapse, only the lowest-cost operators have a chance of surviving. Therefore, in order to reduce the cost of each container, shipping companies started round after round of arms race, they continue to build bigger ships and heavier cranes.
In 1982, Evergreen Shipping ordered 16 container ships at a cost of US$1 billion. After redesigning, each of these ships can carry 2,728 20-foot containers. It is a "G-class" container ship; American Shipping Company followed suit and ordered 14 "economy" ships, each of which can carry 4,482 20-foot containers.
According to the data of "The Great Made in China", the transportation cost of an 8000TEU container ship is 10%~15% lower than that of two 4000TEU container ships. Therefore, even large container ships that are considered to be high-tech, difficult, and high-value-added have been developing in the direction of "building bigger and bigger". Today, this data has reached 21000TEU from 3000TEU in the 1970s.
The large-scale trend of container ships, Tuyuan China Merchants Futures
As large ships sail into the ocean, waterways also begin to widen. The most typical ones are Panama Canal and Suez Canal . The widened Panama Canal officially opened in June 2016.The limit of ships passing through the canal has been raised from 5294TEU to 13208TEU, which means that the proportion of all water routes from Far East to the east coast of the United States has increased by more than 10% in a short period of time. At the same time, the Suez Canal also launched a new canal widening project in 2015. After the transformation, the time from Red Sea to Mediterranean will be shortened from 22 hours to 11 hours, and ships with a capacity of more than 21,000 TEU will be allowed to pass.
In fact, has become the "holy grail" of the shipping industry since the late 1970s. Not only is the volume of ships getting bigger and bigger, but also the number of ships purchased by shipping companies is also growing rapidly.
As a product for shipping companies to gain market share, , shipping space has become a necessary means for each company to compete for the right to speak in pricing. In order to gain sufficient market share, shipbuilding companies have launched a fierce shipbuilding competition.
Led by Maersk, they ordered 20 18,000TEU ships from Daewoo, South Korea in 2011, ranking first in the world in carrying capacity. In the same year, they proposed the goal of "Maersk every day" to take the lead in involution. In 2012, Maersk quickly occupied 16% of the Market share; while the second and third ranked MSC and CMA CGM are not to be outdone, chartering 11 new ships close to 19,200 TEU in the Mediterranean; CMA CGM has upgraded 8 new ships of 16,000 TEU to 17,700 TEU. Subsequently, OOCL, Evergreen Shipping, and the predecessor of COSCO SHIPPING Holdings, , and China Shipping Container Lines, , all joined in this shipbuilding competition.
What is interesting is that whether it is a large ship or a competition for capacity, it is the moat that the shipping companies are building to cross the cycle, but the soaring capacity will intensify the fluctuation of the cycle when the next cycle comes.
So, as early as the beginning of the development of container shipping, the shipping companies realized that —when the high freight rates collapsed, only the establishment of a new price system is the only way out. As a result, an organization that brings shipping companies together to resist risks began to form—an alliance.
From the early Transatlantic Shipping Association, to the North Atlantic Cargo Joint Venture Agreement Organization established in 1971, to the stillborn P3 Alliance in 2014. Shipping alliances gathered, disintegrated, and reassembled like seaweed floating on the sea, and finally formed the three major shipping alliances today: the "2M Alliance" formed by Maersk and MSC, and the "2M Alliance" formed by CMA CGM, COSCO Shipping Holdings, and Evergreen "Ocean Alliance", and THE Alliance formed by Yang Ming Shipping, ONE Shipping, etc.
After experiencing this protracted wave of washing sand, now, the three major shipping alliances control 90% of the global shipping capacity. Therefore, when the next cycle starts, the alliance is equivalent to an "invisible hand", trying to adjust the market freight rate through the layout in advance to cross the cycle.
Three major shipping alliances, picture source network
High-rise buildings rise, buildings collapse
However, the sudden epidemic has completely broken this balance with its uncontrollable trend.
At the beginning of the epidemic in 2020, with the near stagnation of consumer demand in various countries, the three major shipping alliances announced a large-scale suspension of flights. By May of this year, a total of nearly 12% of the global shipping capacity was idle.
However, the recovery of transportation capacity has not caught up with the speed of resumption of work and production in China, and a large number of global orders and production capacity have flooded into China. At the same time, piles of containers are stranded at European and American terminals. Coupled with the low efficiency of unloading at the terminals and the slow rotation of containers, the freight rate directly sits on the rocket. Regarding the reason for the skyrocketing shipping since last year, we have disassembled it many times. A simple summary can be understood as: a serious mismatch between supply and demand, and the superposition of black swan events such as the Suez Canal blockage and the Yantian Port epidemic, which eventually caused a container to overturn more than 10 times. double the price.
Eat meat upstream, drink soup downstream, and the crazy phenomenon of freight forwarders earning money under the skyrocketing shipping has become a widely circulated myth of getting rich in the industry. Last year, many freight forwarders told 36氪: "Irregularity is the norm."
In fact, most people still hold a relatively optimistic attitude towards freight rates. After all, monopolizes 90% of the shipping capacity of the alliance with ocean The biggest voice in the market, and the freight forwarder has signed a long-term contract to stabilize the freight rate.
The ups and downs of the shipping cycle are always unexpected. In the second half of this year, the freight rate dropped rapidly. Many cross-border sellers said that the freight rate has even dropped.fell back to pre-pandemic levels. Take a container on the US-West route as an example. At the peak last year, the average price could reach US$20,000, but now it has dropped to US$3,000, a drop of more than 80%. The wave of
suspension of sailings is also on the rise. According to data from the shipping consulting agency Drewry, from September 19 to October 23, there were a total of 750 major routes such as trans-Pacific, trans-Atlantic, Asia-Northern Europe and Asia-Mediterranean. Among the scheduled voyages, 122 were cancelled, with a cancellation rate of 16%.
Shipping companies cancel 16% of voyages, but there are traces of the collapse of shipping. On the one hand, as the shortage of overseas labor has eased, the turnover efficiency of terminals has begun to improve, and port congestion has significantly eased compared with last year.
On the other hand, the supply and demand callback . Since the epidemic, the boom in online consumption has overdrawn overseas consumption capacity to a certain extent ; coupled with the impact of inflation, the outlook for overseas consumption is still sluggish. According to the import and export data of the Port of Los Angeles in September, as the largest container handling gateway in the United States, the total import volume of the Port of Los Angeles decreased by 26.6% year-on-year, which is also the lowest level since May 2020. What is even more frightening is that the shipbuilding competition among shipping companies continues. Among them, taking advantage of the residual heat of the skyrocketing shipping, by purchasing a large number of second-hand ships, Mediterranean Sea surpassed Maersk in one fell swoop and took the top spot in global container shipping; and Maersk also announced on October 5 that it would add 6 new energy ships against the trend orders. According to Alphaliner data, nearly 2.4 million TEUs of new shipping capacity will be delivered in 2023, and 2.8 million TEUs of shipping capacity will be put on the ocean by 2024, and the current ship order volume of 7 million TEUs , has far surpassed the record of 6.6 million TEU in 2008. Due to several factors, the result is a cliff-like decline in freight rates, contract prices and market prices are inverted, and freight forwarders run away in thunderstorms, which began to appear frequently in the market. However, for shipping companies, ups and downs are commonplace. What's more, last year, they earned dozens of times their previous profits. Even if they deposit all their revenue in the bank, the annual interest can withstand a wave of fluctuations. .
But in the face of the cycle, shipping companies are still in awe and diligence, and are actively building new moats. Taking Maersk as an example, it not only started to deploy new energy ships, but also extended to both ends of the value chain, such as land transportation, air transportation, and logistics business. The six new energy ships it ordered are driven by methanol and dual fuels, which are expected to reduce emissions by 800,000 tons of carbon dioxide each year. Maersk CEO Shi Soren also said in an interview: "Maersk will not hard landing , and the land transportation business will become Maersk's savior."
In addition, new integrations have also begun to appear. With the increase in the size of container ships and market concentration , the homogenization within the alliance is also intensifying. Therefore, shipping companies began to turn their attention to industry chain upstream and downstream integration , such as Maersk integrated Maersk Line, Maersk Terminals, Damco Logistics; CMA CGM acquired CEVA Logistics; COSCO Shipping also integrated containers , Terminal business, etc. Since
is called a cycle, shipping will always bottom out one day, but before this curve rises, no one can say who will successfully cross the cycle and have the last laugh with new moves or old routines .
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