The new shipping company declared bankruptcy！
It is often a wrong choice for freight forwarders to spend money to start a container shipping company, especially for those new players. In June this year, a British freight forwarder named Allseas Global announced the establishment of its container shipping company. Less than half a year after the establishment of the new company in June, the company declared bankruptcy. The newly established British shipping company Allseas Global Project Logistics terminated its service on the Europe route, and the company filed for bankruptcy on October 27.
Allseas operates 6 ships on the Asia-Europe route, stopping at ports such as Ningbo, Chittagong, and Liverpool, but it is understood that 4 of these 6 ships have been returned to the original owners. In June this year, Allseas Global registered and established the first container shipping company in the UK, and plans to expand its shipping capacity by chartering ships or even ordering new ships. Both Alphaliner and Linerlytica’s reports show that in addition to Allseas, more and more new players on long routes and more capacity are also exiting Asia-Europe routes.
However, other shipping companies have also successively canceled their capacity in the past few weeks. As of December 6, the current average weekly capacity of the Asia-Europe market is 418,500 TEU, a decrease of 4.2% from the beginning of November, and 450,750 TEU per week in August, a year-on-year decrease of 7.2%
The decline in container shipping rates has not yet bottomed out
As of December 2, the Shanghai Containerized Freight Index (SCFI) fell another 5% week-on-week; so far in the fourth quarter, on average, the SCFI has dropped 68% year-on-year. If the SCFI continues to decline at this rate, it will be back to 2019 levels by the end of the year. Experts said that spot freight rates on the trans-Pacific to the west coast and the Asia-Europe trade line are now lower than pre-Covid-19 levels.
Sea Intelligence pointed out that the bottom price will be determined by the complex competition among carriers, and the bottom will be reached when they feel that the end is reached. These carriers have large cash flows, as long as one or two large carriers continue to get volume, there is no lower limit, which is difficult for smaller carriers.
A price war could break out in 2023
Drewry predicts shipping companies will idle as much as 1.5 million TEU of capacity next year as the container market changes, with analysts warning that idleness could become common again. The golden timing of the container shipping industry, which gained huge profits during Covid-19, is over. A shipping company BIMCO wrote in the report that the inflection point of the container shipping industry appeared in September this year. It now appears that the global container throughput in 2022 may decrease by about 4% compared with 2021. Next year, container shipping companies may face a global economic recession caused by rising interest rates and the Russia-Ukraine conflict.
BIMCO estimates that the global shipping capacity will increase by almost 8% in 2023. The substantial increase in capacity when demand is in doubt is not good news. The drop in demand will further affect freight prices, said Christian Roeloffs, co-founder of Container xChange, an online platform for container logistics. “By 2023, it’s very likely that there will be a price war,” Roeloffs said. “The capacity constraints that we have seen for the past two years do not appear to be recurring, so we will have enough capacity on ships and containers. We also foresee that the market may face further consolidation.”
