"Turn the shipping company into a combination of air and sea freight, front-end and back-end are covered."
After more than a year of soaring shipping profits, there are signs that high sea freight rates will not last forever.
As of September 30, the global container freight index launched by the Baltic Shipping Exchange and Freightos showed that the average global container freight rate was $4,262 per 40-foot container (FEU), down more than 60 percent year-on-year from last year, and on the main routes, the LTA and spot freight rates began to invert.
However, more than twenty years in the shipping industry, the United States line senior expert Roger (pseudonym) told the first financial reporter, the current high contract prices, shipping companies can enjoy at least until April next year, which means that even if the contract of the shipping company in 2023 will not be as high as 2022, there are at least half a year of high prices "cushion", its current one-year profit is equivalent to the previous ten years. Its current one-year profit is equivalent to the previous ten years, twenty years (the sum of profits), "as long as not to spend indiscriminately, indiscriminate shipbuilding or indiscriminate investment, this money to carry decades no problem." So where do the huge profits of the shipping company flow to? The latest news shows that after Maersk and Duffy shipping, the world's largest container shipping company - Mediterranean Shipping (MSC) also announced to enter the air transport industry.
Roger told reporters that a typical way for shipping companies to expand their investment is to turn the shipping company into an enterprise that integrates air transport and shipping, front-end and back-end, and does not pursue the scale of the shipping company, but opens up the upstream and downstream, vertical integration. For key customers, airfreight is a necessity Although only about 3% of global trade volume is done by air, the value of airfreight cargo exceeds $6 trillion annually, accounting for about 35% of the total value of world trade, according to the International Air Transport Association (IATA).
As mentioned earlier, sea freight prices plummeted after a year, but air freight prices have remained steadily high, even showing a small increase. According to the Freightos Air Freight Index (FAX), air freight prices from China to North America were $5.12/kg for the week ending Sept. 25. For a long time before that, shipping giants avoided developing airfreight operations, but in the last two years, executives at various shipping companies have said that disruptions in global supply lines have prompted many customers to opt for more expensive and reliable airfreight.
"For some key customers, airfreight is a necessity." said Michel Pozas Lucic, global head of Maersk's airfreight division.
For example, auto parts suppliers, apparel manufacturers and technology companies often rely on ocean freight to move their goods, but in the past two years, various ocean delays have caused them to turn to air freight.
"You can't just rely on shipping anymore," said Abbie Durkin, head of Palmer & Purchase, which owns several boutique women's clothing stores in New York, "I'm shipping our entire winter [clothing] collection by air to make sure they get there in time for Christmas. arrive." IATA data shows the air cargo industry growing more than 21 percent year-over-year in 2021, with revenues reaching $289 billion, up from $238 billion in 2020 and $264 billion in 2019 (before the epidemic). Shifts in the global business landscape are also catalyzing changes in the logistics industry.
According to Darren Hulst, Boeing's vice president of commercial marketing, "E-commerce has grown three to five times faster during the epidemic, and e-commerce hubs have grown around the world that need a fleet of aircraft to provide the same services, such as same-day or next-day delivery. " It is worth mentioning that before the epidemic, such as large and heavy cargo, the price of air freight may be more than three times higher than sea freight.
But for products such as computer chips, gadgets and electronics, the difference is relatively small. And given the rapidly rising fees of all kinds charged by ports and carriers when containers are stuffed in ports, air freight is starting to make sense not only for large importers but also for smaller businesses.
The three maritime giants are competing to improve their land, sea and air supply chains Boeing estimates that the global fleet has increased by 400 freighters in the past three years, a 20 percent increase, and that by 2040 the global freighter fleet is expected to increase from more than 2,000 today to more than 3,600. iATA, for its part, expects world air cargo volumes to grow a further 4.4 percent this year.
For two years now, there are signs that the shipping giants that made a lot of money during the epidemic are diversifying into other areas of the logistics business, from freight, warehousing, supply chain software development, to the acquisition of air freight companies, along with more and more shipping companies betting on vertically integrated freight companies, the three shipping giants are competing to improve their land, sea and air supply chains.
As mentioned earlier, MSC has recently begun developing new air cargo solutions to respond to customer demand. According to a company statement, the development of MSC's air cargo services began several months ago, following the delivery of the first of MSC's four Boeing 777-200F aircraft, and these new service solutions will be available from early 2023, with cargo aircraft operated by Atlas Air. Jannie Davel, who has worked for Delta Cargo, Emirates Cargo and DHL, has been appointed to develop its air cargo business.
MSC CEO SorenToft said, "This is our first step into this market and we plan to continue to explore various ways to develop air cargo to complement our core business of container shipping." Previously, Maersk and Duffy Shipping has also long been "in". In April this year, Maersk announced the establishment of air cargo company Maersk Air Cargo; in June, it completed the acquisition of air freight forwarder Wingsource International (Senator International).
Michel Pozas Lucic, Maersk's global head of air cargo, said at the time: "We are increasingly finding that our customers really need an end-to-end logistics solution." Duffy Maritime, for its part, announced in February 2021 the acquisition of four freighters and the creation of its air cargo division, CMA CGM Air Cargo. in May this year, Duffy Maritime said it had signed a cooperation agreement with Air France-KLM to enter into a long-term strategic partnership in the air cargo sector.
Roger explained to reporters, Maersk believes that the shipping business is too cyclical, such as the business to both ends of the extension, and customers bound to more viscous higher, it may be possible to balance the cyclical freight prices are not high, and even in the time of freight loss, the two ends of the business may still make money. And Duffy Shipping is not exactly a version of Maersk. He explained that Maersk unified the shipping company with the logistics company, while Duffy Shipping bought the airline's shares, but its own business and logistics company are still separate.
Roger further said that MSC does not do freight forwarding and back-end, but does "port-to-port" to the extreme, which can be seen recently MSC desperately buying terminals and building ships. However, there are also companies that do not want to join this kind of competition, such as Hapag-Lloyd, which is currently ranked fifth among global shipping companies.
Hapag-Lloyd CEO Rolf Habben Jansen said in a conference call in February that his company does not have the expertise to run an airline.
He also said shipping companies' cargo carriers are too small to compete with companies such as FedEx and UPS, which have hundreds of aircraft. "If you look at some carriers that have 4, 6 or 10 freighters, that doesn't automatically make you a large global cargo carrier. So we remain skeptical." Jensen said
