The leader of the biggest autoliner in the world warned that rising global charter shipping rates, driven by China’s record shipments of electric cars, might not last due to geopolitical actions aimed at limiting the market share of Chinese manufacturers.
According to Andreas Enger, CEO of Höegh Autoliners, “the car carrier industry has actually enjoyed exceptionally good times for a couple of years and we still are.” We can honestly state that our profit margin is remarkable. However, it’s also at a point where you can’t count on it to last forever.
Rates for transporting cars across the globe reached all-time highs due to a lack of capacity that followed a halt in shipbuilding during the epidemic. This helped shippers such as Oslo-listed Höegh, which specializes in transporting heavy goods like cars and mining equipment across the oceans.
The going rate for a ship that can carry nearly 6,500 automobiles is almost US$105,000 per day, close to a peak of US$115,000 established earlier this year, which was the highest since at least 2000, according to Clarksons Research Services, a division of the largest shipbroker in the world.
In an interview with Bloomberg News in Shanghai on Sunday, Enger stated, “The Chinese auto export boom helped create the deficit of capacity that has in many ways enabled us to choose our customers, which allows us to increase rates.”
However, as Chinese automakers such as BYD and SAIC Motor have been increasingly successful in exporting their electric vehicles (EVs) around Europe and Latin America, a geopolitical reaction in the shape of tariffs has occurred.
Provisional charges from EU regulators, for instance, impose an additional 38% tax on SAIC, while BYD will pay an additional 17% on top of the current 10% customs duty. President Joe Biden of the US has promised to raise taxes on Chinese electric vehicles to 102.5 percent this year, and Canada is thinking about doing the same.
Prices may decline as a result of tariffs that restrict exports and increased capacity from rivals, making the existing high shipping rates unsustainable. Rates at half that level will eventually be seen, according to Engineer.
According to Höegh, there are about 50 car-carrying ships in China’s order backlog out of a total of about 700 ships worldwide.
Automobile manufacturers are also participating in this trend. The 7,000-vehicle-capable BYD Explorer No. 1 sailed for Europe in January. Zodiac Maritime is in charge of managing the ship, which is rented to BYD. Within the following two years, BYD intends to expand its fleet by seven additional ships.
According to Enger, such actions by automakers make sense, especially in light of the logistical difficulties many faced during COVID. “We think this is more related to developing a robust supply chain.”
Enger is in China for the fourth time this year, and this visit falls on the same day as the naming ceremony of a brand-new car carrier, one of the twelve Höegh has ordered from China.
According to Höegh, the so-called Aurora Class vessels, which can run on ammonia with zero carbon, will be the biggest and greenest vehicle and truck transporters ever constructed.
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