Vehicle Shipping - Container vs RoRo: Market Comparison
Having explored the different factors playing in on the container market and the RoRo market separately in previously posts, we will here draw on the data already presented to look at similarities and differences and try to establish a better understanding of where the two markets are heading in the future. A comparison of price between container and RoRo on one specific trade lane is also presented.
Capacity’s effect on Price
As we outlined in this previous post, price in the container market has been on a downward slope since the last months of 2022, while the RoRo market is still trending upwards. A drop in demand was surely the instigating factor in the decrease in container freight rates, but the coming increase in capacity is likely to also have influenced this. As shown in the introductory post in this series, global car sales have improved since the start of Covid and are expected to continue growing for the foreseeable future. It is therefore not likely that RoRo rates will decrease significantly before the global capacity situation evens out.
Having explored the peak-price periods for the container sector and experienced how this has dropped as demand lowered and new capacity was introduced on the market, we take another look at the vessel orderbook for both RoRo and Container, as presented in our post looking at capacity, to try to draw some comparison for future price development of the two sectors. Below graph compares new deliveries and the order-book for the RoRo sector in blue and the container sector in orange.
Earlier we looked at how container rates started falling in the end of 2022 and eventually “normalized” in the first quarter of 2023. This was around the same time as new vessel capacity eventually started coming on to the market, though as mentioned, the fall in price was likely more affected by the reduction of demand than the increase in supply. Should a similar scenario play out on the RoRo side, the earliest we could expect global prices to start normalizing would be Q2 of 2024. However, as long as global vehicle sales stay strong and demand for ocean transport keeps up, it is unlikely to happen before the under-capacity in the industry is fully met by introducing additional tonnage to the global fleet. As can be seen from the graph above, peak delivery time will be Q3 of 2025, before slowing down from Q2 2026 and onwards. This aligns well with the forecast from Gram Car Carriers, as quoted above, where they estimate the global RoRo fleet will operate with too few vessels until 2026.
Should this estimate hold true and RoRo rates will remain high until late 2025, while the already slow container market combined with the ongoing influx of new container vessels continue to keep container rates low, the coming two years will be highly favorable for the whole cars-in-container sector.
Price Comparison: Shanghai – North European Ports
To attempt to do a tit-for-tat comparison between RoRo and Container transport of vehicles, a specific lane is chosen where indicative rates have been collected and the two different solutions price level are compared below. The rates are port to port for both solutions, any customs clearance-related costs (besides for cassette equipment) are kept out of the equation, as that would be the same for both solutions. The RoRo rate is collected from freight forwarders in China, given per cubic meter, and includes handling in port, loading and unloading to/from the vessel, and the ocean freight itself from Shanghai to Bremerhaven/Zeebrugge. Container rates are taken from the current Shanghai – Rotterdam container freight index, while specific handling cost, cost related to loading and unloading, and equipment relocation costs are gathered from source and baked into one sum.
A comparison is done on three different vehicle types in order to illustrate the cost differences between container and RoRo for various vehicle types and sizes, which ultimately corresponds to Kar-Tainer’s three main containerization systems: the 2-car system, 3-car system, and 4-car cassette system for containerization of vehicles. A generic pickup truck, an SUV, and a smaller hatchback is used as samples.
As can be read from above table the current estimated cost of transporting a vehicle from China to Europe by RoRo is much higher than doing it by container. For a large-sized vehicle like a pickup truck the price of shipping in container would be only 32% of the RoRo cost, for an SUV it would be roughly 36% of the RoRo cost, and for a smaller hatchback the container cost would be 43% of the RoRo cost.
It has to be underlined again that the prices used for the RoRo side of the comparison are taken from freight forwarders operating on the spot market and will surely be lower for OEMs with long-term, ongoing export operations. However, this price difference is certainly one of the main reasons behind the huge growth in containerized vehicle shipments out of China over the past 6-12 months. A lot of the export growth in China comes from the surge of electric vehicle demand across the globe, perhaps especially in Europe. With this surge in demand, a score of new actors are entering the export market beyond the regular players like SAIC, BYD, Geely, Greatwall and more. There are also several younger brands like Seres, Voyah, Hongqi, Aiways, and more who are establishing their export operations. However much of this new business still happens through FOB sales to overseas import agents, leasing companies, or car traders who purchase cars in batches for onwards distribution. This in turn fuels the spot-market demand, as it is little likely that a European importer purchasing 100 cars from China will be able to negotiate very favorable rates with the larger RoRo operators. Thus, we get a fairly good idea of the dynamics in the market and the cost savings such car transporters are currently looking at by shipping cars in containers.
In Review
The shipping industry has been going through a tumultuous period for the past 3 years and will likely continue on rough seas for the foreseeable future. While the RoRo sector is now sitting at the crest of the wave, the container sector is pinned in the trough. New container capacity is flooding the market, global trade is at a standstill, and rates have dropped to record lows. Industry experts have indicated that the current situation in the container market could remain well into the 2030s. On the other hand, available RoRo vessels are still far below global demand and the cost of RoRo shipping is sky-high. Equilibrium in that sector will likely not be reached before 2026, so vehicle shippers must brace themselves for prolonged high costs and hard to find capacity when shipping by RoRo.
As was illustrated in this market comparison there are today extreme cost efficiencies to be found when changing transport mode from RoRo to containers on certain lanes. When shipping cars in containers you need a proper loading solution to ensure you utilize the container to the full extent, load your cars in a safe manner, and keep efficiency high throughout any handling operations. At Kar-Tainer we have delivered such solutions for over 30 years and have thus seen several market fluctuations between RoRo and container like the ones the automotive logistics scene is experiencing today. If you want to be positioned to take advantage of the opportunities when they arise, you need the right expertise, equipment, and strategy ready. Reach out to us to learn how we can support on this.