Due to the drop in spot rates, there are records in the red for shipping lines, those with less exposure to this market are more protected.
There has been a lot of talk about the drop in spot rates, so much so that on the Trans-Pacific route they have decreased by 80% and 84% this year.
According to the consultancy Drewry, it is due to the correction of the hyperinflationary trend that marked the pandemic and not due to a real collapse, taking into account that the factors that favored its instability such as capacity shortages, strong demand and port congestion are no longer present. present. In fact, when compared to the high inflation found in many economies, current rates are lower.
As for the contractual rates, these have not yet been normalized. On the east-west route, contract rates paid by shippers remain approximately 80% higher than in December 2019.
For shipping lines, the normalization of rates has consequences for their profitability, with a gap between the benefits of regular shipping between large and small players. According to the same consultancy, the most profitable lines with the greatest contract coverage soon and their rivals oriented to the spot market should start using “red ink.”
For the first quarter of this year, shipping players including Maersk and Hapag-Lloyd suffered drops in profitability, although it was more noticeable for small lines such as ZIM and Wan Hai Lines, with a 36.6% decline in revenue, 28, 2%, 63.0% and 67.2% respectively. Therefore, the decrease in profitability can be attributed to lower revenues due to the drop in volumes and freight rates.
It is important to mention that a differentiating factor in this decrease is the degree of exposure in the spot market, which implied greater losses for the smaller shipping companies. ZIM transports half of its volumes on the Trans-Pacific route, committing only 50% in contracts while Wan Hai Lines has a high exposure to the spot market.
A second factor that would have an influence on increasing this gap would be the degree of exposure in the different maritime routes. The Wan Hai shipping company concentrates traffic on the Intra-Asia route, where fares are known to have been low. While lines such as Maersk and Hapag-Lloyd navigate routes where fares, despite being low, remain higher.
In any case, the consultant projects that, based on the 20.75% year-on-year decrease in rates and their downward trend, shipping companies will face a difficult outlook in the remainder of the year, both for small lines and for the big ones.
