7.7 C
Hamburg
Thursday, February 22, 2024
Home Freight News Upcoming renegotiations of Asia-Europe contract rates to signal freight rates trends, said...

Upcoming renegotiations of Asia-Europe contract rates to signal freight rates trends, said HSBC

British multinational banking and financial services organisation, HSBC brings forward its trough scenario for container shipping. HSBC lowered its demand estimations for 2023 and increased its effective 2022-24e supply estimates.

This is reflecting the unwinding of congestion, according to the banking major, which also sees significant downside risks for 2023 consensus profits.

Meanwhile, sport box rates have fallen significantly in the latest weeks with the Shanghai Containerised Freight Index (SCFI) falling 51% since the end of July, translating to a 7.5% decline per week.

"We argue weaker-than-expected demand, faster easing of congestions and price competition to get marginal cargoes led to this decline," pointed out HSBC, which added that with this pace of a 7.5% w-o-w decline, spot rates may hit the average spot rates of 2019 by the end of 2022e. At this level, HSBC expects capacity discipline to meaningfully emerge, especially when rates go below cash costs.

HSBC believes the SCFI to trough in mid-2023e and sector profitability to bottom in 2H23e.

"We cut our 2022-24 profit estimates up to 51% and also cut our dividend expectations, particularly for 2023. We expect 3Q22e earnings to still remain resilient, but see downside in 4Q22 and beyond. We see risks to 2023 consensus profits where we are now 27-85% below," noted Parash Jain, HSBC's head of shipping & ports & Asia transport research.

Given HSBC's expectation of freight rates troughing in mid-2023, share prices will likely trough by the end-1Q23, according to the report.

HSBC pointed out that the reactivation of capacity after the Golden Week period vs. extended blanked sailings will likely determine whether freight rates are going to stabilise any time soon.

The 3Q22 results of shipping and logistics companies (mid-October to mid-November) and potential changes to 2022 guidance may provide ques on whether shipping lines were able to defend their contracts, according to HSBC.

The British bank organisation concluded that renegotiations of Asia-Europe contract rates in November-December at or above operating costs will signal whether the worst is behind us for container shipping freight rates.





Antonis Karamalegkos
Managing Editor

Latest Posts

Unlocking the Advantages of MERV Filters for Your Home

In the quest for a healthier and more comfortable indoor environment, many homeowners are turning their attention to the air quality within their living...

Hapag-Lloyd introduces new rates from Indian Sub to North Europe

Hapag-Lloyd is implementing tariff rate adjustments for shipments from the Indian Subcontinent to North Europe. These adjustments will come into effect for sailings commencing on...

Maersk completes largest infrastructure investment in New Zealand with new cold chain facility

A.P. Moller-Maersk marked the inauguration of its cutting-edge integrated cold chain facility at the Ruakura Superhub, reaffirming Hamilton's pivotal role as a central hub...

HMM earns ‘A-‘ environmental rating from CDP

HMM has been honoured for its commitment to sustainability and transparency in addressing climate change by the global environmental organization CDP, achieving an ‘A-’...

Expanding supply to put brakes on rates

A rise in container capacity will halt the increase in freight on the major east-west trades according to Drewry’s latest tool, the Container Capacity Insight...