Sea freight industry suffers from inflation, logistical tension but registers record profits

In a context of unprecedented economic recovery, the maritime transport sector has to face increased demand while logistics are struggling to keep up. In February 2020, the pandemic put a stop to world trade because of a completely locked-in China: “The first half of 2020 was a historic moment in maritime transport where we observed a completely insane shrinking of demand. At the height of this first half, 12% of the global fleet was unused. Our customers were asking us to slow down the flow of goods and find storage solutions, ”explains Damien Denizot, deputy director of communications for the French shipowner CMA-CGM. Then a few months later, while the successive recovery plans of the Western States and the boom in e-commerce (+ 25% between June 2020 and June 2021, source FEVAD) generate very strong demand; China is restarting the machine. The aftermath of Covid-19 has completely upset consumption habits where repeated confinements and paralysis of various services (restaurants, cinemas, aviation, etc.) have pushed individuals to spend their savings with a few clicks on the Internet: from the new chair From office to the latest Nike pair to the most iconic coffee machine, everything goes! “Consumption took off like a whiplash. There was a complete reversal movement: in a month and a half, it started again in an extremely powerful way. In October 2020, a historic figure in maritime transport, only 1% of the world fleet was unused, ”says Denizot. Thus, between the start of the first half of 2020 and the end of the second, the world fleet experiences two diametrically opposed and unprecedented situations.

This fall 2021, the time has come for an increase in supply in the sector: CMA-CGM is adding some 800,000 additional containers to its fleet to bring it to 4.8 million “boxes” while the Danish giant AP Moeller-Maersk announced Tuesday, November 2, its acquisition of Senator International, a German company dedicated to air transport, for $ 644 million. Despite the efforts made and the millions of dollars injected, the sector continues to operate “just in time”.

Supply vs demand

The equation is complex for shipowners around the world: managing excess demand with insufficient supply. It is less so for the eternal law of markets; with demand exceeding supply, the result is clear: prices soar. According to the Freightos Baltic Index (FBX), the average worldwide rental cost was around $ 2,240 on October 8, 2020, compared to $ 9,202 today. For containers traveling on the route between China and Europe, the rental has dropped from $ 2,146 to $ 13,014. When leaving China, the metal box increases its price six-fold. How to deal with this unprecedented rise in prices? Damien Denizot explains that the situation is, in reality, less tense: “the FBX only concerns the“ spot ”market – short-term market on which the assets are traded in less than thirty days – where clients charge by playing on the imbalance between supply and demand. As a reminder, between 25% and 35% of the market falls under this type of contract. For example, long-term contracts represent 80% of the merchandise transported by CMA-CGM. This did not prevent CMA-CGM from freezing “spot” freight rates until February 1, 2022, in an effort to curb this galloping inflation and smooth its impact on customers. This historic decision was followed by several competitors such as Hapag-Lloyd, number five in maritime transport.

The beginnings of generalized inflation?

So should we be concerned about this sudden inflation? Will it spill over into other sectors of the economy? For Isabelle Méjean, an economist specializing in international trade issues and a teacher at Sciences Po, the concerns are more about “energy prices than freight prices”. With “56% of consumption attributed to services, agriculture, etc., goods that are not traded, that necessarily isolates the phenomenon. Add to that the fact that the cost of freight is roughly 3% of the price of a consumer good, ”says the economist. “The consensus of monetary policies and macroeconomists in Europe is that, at the moment, this is not a big worry. “So, let’s be reassured, with the approach of the festivities, we will be able to surf the most fashionable trends, redo the has-been decor of the living room and garnish the tree with the latest gadgets; all of this without the specter of inflation playing the game.

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