particular tend to face challenges when obtaining space and equipment. Just for clarification, headhaul is the trade direction in which ships are usually full and backhaul is in the opposite direction. For example, Asia to US is the headhaul and US to Asia is the backhaul, as the majority of containers in that direction are empty. One of the reasons which have been hotly debated in the industry since mid-2020 is the disruption in the flow of empty equipment leading carriers to prioritize moving equipment to Asia rather than taking on (low)paying cargo. Taking a closer look at the finances underlying at least marginal backhaul cargo sheds further light on these challenges. The World Container Index (WCI) provides weekly data on spot rates in a variety of industries and is available for free – and the advantage of this is that it shows spot rates on both headhaul and backhaul in a number of major industries. This demonstrates the importance of backhaul cargo compared to headhaul cargo in the eyes of the carrier. In the following, we will consider Transpacific trade as measured by rates in both directions between Shanghai and Los Angeles and Asia-North Europe trade as measured between Shanghai and Rotterdam in both directions. Imbalance between head and backhaul rates In very broad terms, the trade imbalance is now at a point where for every two containers shipped to North America and Europe from Asia, there is only cargo for one container going back. A container carrier obviously needs to operate a ship as a full round trip and not just in one direction. Hence, from the perspective of a carrier, it is the round trip-revenue which is important and not simply the revenue in each direction independently. This means that for a round trip, the carrier will have two full paying containers on the headhaul and one full container on the backhaul. For example, if the headhaul rate is 2,000 USD and the backhaul rate is 1,000 USD per container, the carrier will get a total round trip-revenue of 5,000 USD for two slots as one container goes back empty. The backhaul shippers thus pays 20% of the total revenue seen from the perspective of the carrier. Revenue share of Backhauls before and now Using the rate data from WCI, we can determine how much the backhaul shippers contribute based on the roundtrip revenue. This is shown in the two figures below. Before the pandemic, backhaul shippers paid about 15-25% of the total revenue on Transpacific and 10-15% on Asia-Europe. But with the dramatic changes in rates in 2020-2021, we are now a point where backhaul shippers only pay about 5% of the total round trip-revenue. On the Transpacific, the number is actually even lower as disruptions caused by the pandemic have also skewed the imbalance so much that it is nearly 3 to 1.
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