The correction of spot freight rates for container shipping may have begun, and the risks of high freight rates are released. Pay attention to long-term agreement negotiations (Mor
A Morgan Stanley report warned that spot rates (Spot Rate) in the global container shipping market may have peaked and are about to enter a correction phase.
A Morgan Stanley report warned that spot rates (Spot Rate) in the global container shipping market may have peaked and are about to enter a correction phase. Although current spot freight rates (such as SCFI) are still at historically high levels, data show that the upward momentum has exhausted and supply-side pressure is beginning to be released (a large amount of new shipping capacity will be delivered in the second half of the year). Management comments also indicate that front-loading during the retail peak season may have overdrafted demand in advance. MS believes that spot freight rates will face downward pressure in the second half of the year as new ship deliveries accelerate and demand falls seasonally. Although this is bad for shipping companies' profits in the short term, it will help the market digest valuation bubbles and lay a more sustainable benchmark for a new round of long-term agreement negotiations (usually in the second half of the year). The market’s linear extrapolation of freight rates “going up forever” may be too optimistic. One-sentence conclusion: The turning point of container spot freight rates may have arrived, and we need to be alert to the risk of short-term stock price corrections. However, in the long term, the normalization of freight rates will help return to rational valuation and start a new long-term cooperation cycle. Positive/negative: negative for container shipping companies such as COSCO (601919.SH/1919.HK) and Maersk (MAERSKb.CO). The market has fully anticipated and priced in the surge in profits brought about by high freight rates, but it has underestimated the speed and extent of the fall in freight rates. Catalysts: 1) The weekly changes in the Shanghai Export Container Freight Index (SCFI) are the most direct signal to determine the turning point; 2) The inventory and replenishment rhythm of major retailers (Walmart, Target); 3) The port congestion indicator is a direct indicator of the supply and demand of effective shipping capacity.