- Time：2023/3/30 Posted：Shenzhen RSD International Freight Forwarding Co., Ltd
- In the latest issue of the market weekly report, well-known shipping consulting company Sea Intelligence stated that container shipping companies still deployed record capacity during the Chinese Lunar New Year in 2023, which makes little sense when demand growth stagnates. This means that the price war in the transportation industry may start ahead of schedule.
In the latest issue of the market weekly report, Sea-Intelligence made an outlook on the market situation before the Chinese Lunar New Year, stating that due to the record high transportation capacity invested in the market, coupled with the sluggish demand, the transportation industry is likely to fall into the same price war as a few years ago.
For the centralized transportation market, around the Chinese New Year, national production almost stops, so exports will be relatively less. This time, when the holiday season comes, demand is already declining, and many new ships will join the market.
Sea-Intelligence estimates that due to the huge profits made by container shipping companies during the pandemic, some shipping companies may fill their ships by reducing prices during difficult times. The analysis company said, "Due to the large amount of cash sitting on shipping companies, coupled with high profits in the third quarter, this may lead to another price war in the consolidation market, reminiscent of the price war we saw in 2015-2016."
Previously, the price war in the container market that lasted for nearly a year and a half from 2015 to 2017 caused carriers to pay a high price. At that time, Hanjin Shipping, the seventh largest shipping company in the world, also went bankrupt.
The entire industry may not be interested in a new price war at present, but Sea Intelligence believes that in the face of falling demand, container shipping companies are still adding new ships at sea, which "does not make much sense.". Sea-Intelligence believes that as freight rates plummet and the Chinese Lunar New Year approaches, carriers should "cancel more voyages than usual and strive to get freight rates back on track;" or at least try to take action to stop the bleeding. "
But now, it's not going to happen. Sea-Intelligence stated that there will be a surplus of transportation capacity around the Chinese New Year from January 22 to 27, 2023, as the market's transportation capacity during this period of this year will be "higher than the deployed transportation capacity in 2021. It needs to be emphasized that there was an absolute surge in demand in 2021 at that time. On the contrary, the number of blank flights during this period of this year may even be lower than last year.
According to Sea-intelligence data, it currently appears that China's transportation capacity during the Spring Festival will exceed 1.35 million TEUs. If this argument holds and demand continues to decline, "freight rates will continue to decline, as they have in the past few months." The consulting company continues to introduce that shipping companies have placed significant bets on trans Pacific and Asian and Nordic routes. In fact, only the Asia Mediterranean route showed a similar reduction in capacity to the "normal" years before the pandemic.
The consulting company also said, "Given that we are only one month away from the Chinese New Year, shipping companies need to make significant efforts to announce enough blank flights to restore the capacity provided to historical levels."
