TV and Iron Ore Shipping Costs Decline... Automobile Shipping Fees Soar

[Asia Economy Reporter Yoo Hyun-seok] Completed car manufacturers are facing difficulties securing Pure Car and Truck Carriers (PCTC). Due to a shortage of car carriers and an increase in Chinese automobile exports, freight rates have surged. Meanwhile, container ships and dry bulk carriers transporting products like TVs and iron ore continue to see declining freight rates amid concerns of an economic downturn. A polarization phenomenon in freight rates between car carriers and general cargo ships is emerging.

The Shanghai Containerized Freight Index (SCFI) fell by 22.89 points (2.2%) to 1006.89 on the 3rd compared to the 20th of last month. The SCFI has steadily declined since reaching an all-time high of 5109.60 in January last year. It has dropped to about one-fifth of that level in one year. Generally, a SCFI value of 1000 is considered the breakeven point for shipping companies. Similarly, the Baltic Dry Index (BDI), which tracks freight rates for dry bulk carriers transporting raw materials like coal, iron ore, and grains, is in a similar situation. As of the 7th, it stood at 601, down by more than half from 1422 a year ago.

The sharp decline in SCFI and BDI is due to economic concerns. Since last year, countries worldwide have implemented tightening policies, increasing fears of a global economic recession. Additionally, expectations of a significant increase in ship supply are accelerating the drop in freight rates. In 2022, global ship orders totaled 42.78 million CGT (Compensated Gross Tonnage). This compares to 46.64 million CGT in 2021 and 23.90 million CGT in 2020.

Conversely, PCTC rates continue to rise. The daily charter rate for a 6500 CEU (1 CEU is the space to carry one vehicle) class car carrier was $46,167 on average in the first quarter of last year, rising to $59,167 in the second quarter, $78,333 in the third quarter, and $105,000 in the fourth quarter. In January this year, it was about $110,000.

The sharp increase in freight rates is due to a shortage of PCTCs. The number of car carriers, which was 770 vessels in 2019, has decreased to about 750 currently. Global shipping companies reduced orders fearing a decline in car transport volumes due to the spread of COVID-19.

Additionally, the increase in Chinese automobile exports has also had an impact. China's automobile exports reached 3.11 million units last year, a 54.4% increase compared to the previous year. China has surpassed Germany, which was previously second with 2.61 million units. As a result, China is absorbing a large share of car carriers, causing a shortage and a sharp rise in freight rates. This has made it difficult for companies like Renault Korea Motors and SsangYong Motor to export overseas.

The rise in car carrier freight rates is likely to continue. Researcher Bae Gi-yeon of Meritz Securities said, "The shortage of PCTCs is expected to structurally continue throughout 2023," adding, "The scheduled delivery volume of car carriers this year is 76,600 CEU, which is only 2% of the total fleet capacity."

This content was produced with the assistance of AI translation services.