Vehicle Shipping - Container vs RoRo: Price Situation
In this section we explore the current pricing situation in both the RoRo sector and the container sector. Pricing data is widely available in the container sector due to the widespread use and benchmarking in this field. On the RoRo side however, pricing data is more obscure. Though we can gain some insights from the development of daily time charter price levels and spot-market quotes we can access in the semi-open market.
Over the past years, time-charter rates for RoRo vessels have skyrocketed to levels never seen before. In their Quarterly report from Q1 2023, the tonnage provider Gram Car Carriers (GCC) reported daily time-charter rates of up to US$ 110,000 on one-year charter contracts of Panamax class RoRo vessels with carrying capacity of 6000+ CEU, US$ 90,000 for Mid-size vessels carrying 4000+ CEU, and US$ 30,000 for short-sea distribution vessels with a carrying capacity of around 2000 CEU.
Though current TC rates on new contracts are extremely high, GCC reports an average TC rate on their whole fleet of US$ 25,620, roughly $30k for the Panamax class ships, $29k for mid-sized ships, and $15.5k for smaller distribution class vessels. It is reasonable to assume the situation to be similar among most established operators and tonnage providers, and the increase in TC rates is mainly seen in vessels entering into new contracts now, as opposed to drive up the cost for the entire industry.
Whereas the current high TC rates surely are a contributing factor to global RoRo rates, it is more likely to affect the spot-market rather than the rate of long-term contracts. It will likely also have an effect on the operation cost of newly chartered vessels which are chartered for highly specific purpose, e.g. car-makers themselves chartering capacity in order to operate specific lanes, like seem to be a trend among some OEMs.
To get a better basis to compare cost on a unit-to-unit basis, cost samples were collected for the route Shanghai to North European Ports (Bremerhaven, Zeebrugge) over the summer months of this year and compared with a “known rate” from before the capacity squeeze materialized. Data was collected from freight forwarders purchasing RoRo space on the larger operators’ vessels before selling this on the open market, so costs mentioned below are likely on the higher side.
As can be seen from the graph there has been a steady increase in price over the past months, and compared to pre-/early Covid, the price has almost tripled. China has been the hot-bed for new exports over the past year, so the price increases experienced on the China – Europe Lane is likely higher than what can be seen elsewhere in the world, but as much of the global capacity has also been redirected to this profitable lane, it is safe to assume that price growth has/is happening elsewhere too.
Container freight rates peaked in September 2021 when the global container freight rate index was measured at US$ 10,361.00. The most trafficked shipping lanes around the world experienced extreme price increase, and there is anecdotal evidence of rates of $30k and above per 40-feet container shipped from China to North-American and European ports. The global container freight index was registered at over US$ 2,000 for 30 executive months, from the Summer of 2020 till March 2023. Below is an overview of the freight rate index from January 2019 to June 2023.
As can be seen in the graph, prices rose sharply towards the end of 2020, before starting to settle down in the end of 2022, eventually dropping slowly and steadily through the first half of 2023 before reaching a bottom in July. Rates are now up a bit again, and the World Container Index as of August 31st is at US$ 1,740.00. This price increase is more likely due to carrier fine-tuning of capacity and blank sailings as opposed to any significant increase in demand. With the high amount of new capacity to be added to the industry over the coming year, and the relative slowdown in global trade, it is not expected that the cost of container shipping will increase in the near- to long-term, but rather even out somewhere around the current level, which is also comparable to the pre-covid rate levels.
We know from first-hand experience and most forwarders and shipping lines can likely attest to that freight rates still fluctuate heavily across the globe. While the main global shipping lanes are now operating at very low freight rates, other lanes can still be very expensive. In this study we have already looked at RoRo pricing from Shanghai to Main North-European ports, so for the sake of relative comparison we also look at the container freight index on the Shanghai to Rotterdam trade route as well below:
As seen in this graph, the rates fell quickly at the end of 2022 and have been kept low throughout 2023. Where there throughout Covid was an extreme shortage of containers in Chinese ports, there is now a reported redundancy.
The price of RoRo is at record high levels, very similar to what was seen in the container sector during the peak months of the Covid period. Container rates on the other hand have dropped to levels even lower than pre-covid for main shipping lanes but are still relatively high on other smaller lanes. This price development has been highly in favor of increased containerization of cars, something which can be easily seen especially on the China to Europe lane where a large number of cars are currently transported in containers. This trend will likely continue growing, and also spread to other regions as long as the current price dynamics continue.
Follow us in the coming weeks as we look at some interesting current cases in the world of vehicle transportation, and summarize the different findings related to both capacity and cost of both the RoRo sector and the container sector in an attempt to look at how these trends will develop in the years to come.