On June 17, COSCO Marine, a company listed on the Beijing Stock Exchange, disclosed its performance forecast. According to preliminary calculations by the company's financial management department, it is estimated that in the first half of 2024, the company’s net profit attributable to shareholders will increase significantly, reaching between 60 million and 80 million yuan, with an expected growth range of 263.27% to 384.36%.
COSCO Marine's net profit has surged, largely due to the substantial increase in international shipping prices. From the beginning of the year to June 11, the Baltic Dry Index (BDI) averaged 1821.25 points, up 56.84% from the same period last year’s average of 1161.25 points. During this period, the Baltic Panamax Index (BPI) average daily charter rate was $14,507.16, up 36.45% from last year’s $10,631.82. Notably, according to the global digital freight platform Freightos, as of June 10, the prices for maritime shipping containers from East Asia to the US West Coast and East Coast rose to $5,888 per 40-foot equivalent unit (FEU) and $7,516 per FEU, respectively, a sharp increase of 17% and 12% from the previous week. As of June 17, the Baltic Index had risen to 1948.00, with a weekly increase of 3.45% and a monthly increase of 5.64%. The China Containerized Freight Index (CCFI) reached 1733.47 during the week of June 14, with a weekly increase of 8.85% and a monthly increase of 32.14%. The BDI is an index of bulk raw material shipping costs, reflecting the transportation of essential goods and industrial raw materials like steel, pulp, grain, coal, ore, phosphate rock, and bauxite. Therefore, the performance of the bulk shipping industry is closely tied to global economic conditions and raw material prices, making the Baltic Index a leading economic indicator. Many industry experts predict that international shipping prices will remain high in the short term.
Recently, Liu Shuohu, Vice President of Logistics Supply Chain at the cross-border e-commerce platform DHgate Group, stated that due to ongoing tensions in the Red Sea region over the past two months, global port congestion has worsened. A large number of container ships have been rerouted, increasing both shipping distances and times, and reducing the turnover rate of containers and ships, leading to significant losses in shipping capacity. Despite the UN Security Council's June 10 resolution for a ceasefire in Gaza, fighting between Israel and Palestine continues, which has contributed to the recent rebound in international shipping prices. International parties are actively coordinating, and intensive negotiations are expected to continue, with some hope for a ceasefire in Gaza. However, given the significant rebound in shipping prices since June 10, the market remains pessimistic about the prospects for a ceasefire, indicating that the Red Sea situation will continue to impact the international shipping market.
Furthermore, the ongoing conflict in Gaza and the intense summer heat in the Northern Hemisphere have further fueled global shipping prices. Since May, multiple regions around the world, including India and Mexico, have experienced extreme temperatures exceeding 50°C. New Delhi, India’s capital, faced unprecedented extreme heat, with temperatures soaring to 52.3°C. According to the latest data from the US National Centers for Environmental Information, global temperatures in the first four months of 2024 set a 175-year record. Recently, extreme weather in Southeast Asia has caused severe congestion at Singapore's port, the world's second-largest container port. The current wait time for container ships at Singapore is up to seven days, with a backlog of 450,000 TEUs, far exceeding the peak during the COVID-19 pandemic. However, consulting firm Linerlytica indicates that while congestion at Singapore port is worsening, ports like Malaysia’s Port Klang, UAE’s Jebel Ali, and South Korea’s Busan are not experiencing congestion levels comparable to the peak in 2021, suggesting that it is too early to declare an Asian port congestion crisis.
The World Weather Attribution organization reported in May that due to global warming, water shortages in canals will become more frequent. Their analysis indicates that under current global warming conditions of 1.2°C, water shortages on the scale of 2023 are a once-in-40-years event, and even under normal El Niño cycles, precipitation in canal areas will decrease by 8%. They also pointed out that with continued global warming, predicting water shortage cycles will become more challenging. Global shipping will inevitably be affected by droughts caused by global warming. Currently, 90% of global trade is conducted via maritime transport, and extreme weather disasters due to ocean warming will cause severe disruptions to shipping routes and ports. Some industry insiders suggest that 2024 could become the hottest year on record globally, and as the Northern Hemisphere enters summer, the already chaotic shipping conditions from the Red Sea to the Panama Canal could be further impacted by extreme weather conditions.
Additionally, the Red Sea conflict has led to rerouted shipping lanes, increasing shipping times and costs, and exacerbating port congestion, worsening the already tight container market. Globally, the supply of containers is strained, with turnaround efficiency at ports reaching its limit. Major shipping companies like Maersk and MSC are experiencing container shortages, and port container yards are also running low on containers.
This wave of shipping trends has also benefited China International Marine Containers (CIMC). The company reported that the current global container transportation uncertainties have led to a significant increase in customers’ willingness to stockpile containers. CIMC’s container manufacturing business has seen a year-on-year increase in production and sales. In the first quarter, the company sold a total of 494,400 TEUs, up approximately 499.27% from the same period last year’s 82,500 TEUs. According to Clarkson Research, since the beginning of 2024, around 1.2 million TEUs of new ships have been delivered, accounting for about 4% of the existing container shipping capacity. With global shipping capacity tight, only 0.7% of the global fleet was idle as of mid-May.
As global shipping enters the traditional summer peak season after July, combined with the ongoing Red Sea crisis, the likelihood of a significant decrease in global shipping prices in the short term is low.
Source: International Business Daily
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