Sea freight prices that have soared for more than a year are on the hot search again.
On September 17, the Shanghai Shipping Exchange announced the latest export container freight index, showing that the Shanghai Export Container Index (SCFI), which represents the spot price, rose to 4,622.51 points, a record high, which is larger than last year’s lowest point of 818 points. Up 465%.
SinotransAccording to data provided by Zeng Yuanli, an employee of a company limited by shares, from June last year to early September this year, ocean freight rates continued to rise. The price of 20-foot standard container containers from the eastern coastal ports of China to the west coast of the United States rose from US$1,000 to US$10,000. The highest was reached. The price of other routes has also risen sharply, and the shipping price to the Middle East has risen from US$300 to US$4,500.
”It has completely exceeded our expectations and the company’s ability to bear it. However, the market has not collapsed because market demand is still strong, and price increases may continue, at least for a period of time.” Zeng Yuanli said.
Demand increased sharply, operation efficiency decreased, and middlemen “fried containers and collapsed cabins”
Ocean transportation is an industry that provides maritime passenger or freight services, and is the most important mode of transportation in international logistics.
China International Marine Containers (Group) Co., Ltd. (000039.SZ, hereinafter referred to as ” CIMC“) is the world’s largest and most complete container manufacturing group. On September 3, CIMC said in response to investors’ questions that the epidemic has led to a decline in the efficiency of global terminal operations, which in turn led to congestion affecting the return of empty containers. This situation cannot be changed so far, and the boom in container shipping may continue into the first half of next year.
Ningbo Chengyou Import and Export Company mainly faces the US and European markets. Gu Shaoyong, the general manager of the company, told a reporter from China Economic Weekly that in order to respond to the epidemic and stimulate the economy, the United States and some European countries have directly issued cash subsidies to all residents on many occasions. , Americans do not have the habit of saving money, they spend it when they have money, especially after the epidemic, they cannot go out casually. The demand for products used in the yard has skyrocketed, which may be the root cause of the extraordinary growth in demand in overseas markets.
CIMC stated that China’s epidemic prevention and control has done a good job, and China has played a more important role in the global supply chain. Therefore, China’s export trade has been growing, which has also increased the demand for containers.
”After the epidemic, international supply chains have become more dependent on China.” Gu Shaoyong said.
Ministry of Commerce International TradeIn an interview with a reporter from China Economic Weekly, Mei Xinyu, a researcher of the Institute of Economic Cooperation, said that the global spread of the new crown pneumonia epidemic from the second quarter of last year to the present is like a global unified exam with difficult questions, which is beneficial to top students. China has successfully responded to the impact of the new crown pneumonia epidemic. China’s fundamentals have not changed, and it still maintains its institutional advantages in effective organization and mobilization. The industrial chain and supply chain have recovered quickly. The growth of China’s foreign trade is actually affected by this mechanism.
From January to July this year, China’s foreign trade continued to maintain a momentum of rapid growth, with exports increasing by 24.5% year-on-year, the growth rate hitting a 10-year high.
Port of NingboAn executive analyzed to China Economic Weekly that due to the outbreak of the epidemic, there was a shortage of supplies. As the first country to fight the epidemic with a strong and stable situation, China will become the only major economy in the world to achieve positive economic growth in 2020. Domestic productivity has greatly recovered, and the manufacturing industry in some countries has been shut down. Therefore, foreign countries have purchased materials from China, and a large number of orders have flowed to China, which has expanded China’s exports. Under such a situation, shipping companies started to increase prices one after another, and due to the inconsistency of export and import demand, the skyrocketing ocean freight was only for one-way routes exported from China. After shipping companies transported goods to Europe, the United States and other places, there were not enough goods to be shipped. Back, shipping companies were unwilling to return to China with empty ships, resulting in an imbalance between inbound and outbound shipments. There was a large backlog of ships waiting for cargo to board at ports in Europe, America and other countries, a large number of empty containers were stranded overseas, and container turnover A series of phenomena such as low efficiency and short supply of containers in China.
”Under the situation that the supply and demand of container transportation are highly imbalanced, the contradiction between supply and demand of capacity is reflected behind the’hard to find one box’. The tight supply of effective capacity continues to increase, which promotes a sharp increase in freight rates.” According to Zhang, who has more than 20 years of experience in the shipping industry. Wei revealed to China Economic Weekly that the supply of transportation capacity has a certain degree of lag, and the growth of transportation capacity will affect the balance of shipping supply and demand.
According to Zeng Yuanli, overall, shipping capacity has declined. The European line can make 6 round trips a year, but now there are no 4 rounds, which is equivalent to one-third less capacity. From Ningbo to the west coast of the United States, the normal period is about 18 days. However, the average congestion time at US ports is currently two weeks. For a day of congestion, a 10,000 TEU ship will increase the charter by 40,000 US dollars. Two weeks, 560,000 US dollars. Gone.
”This is still a small head.” Zeng Yuanli said that the increased costs of congestion include terminal congestion fees, personnel wages, and oil burning, which will push up shipping prices.
Zeng Yuanli also said that the shipping market has been in a slump for 10 consecutive years, and many giants have suffered continuous losses. The current recovery and price increases are partly due to the bottoming of the market.
On September 10, Wang Kai, the person in charge of a foreign trade logistics service company in Huizhou, said: “As a service provider of foreign trade logistics, it is impossible to control the soaring of logistics prices. It is the major shipping companies and airlines that really control the pricing power of logistics links. These industry giants monopolize core logistics resources, and they can influence logistics prices.”
Zeng Yuanli said that shipping companies do indeed raise prices in groups, but they are not monopolistic.
Under the background of “a container is hard to find”, “frying containers and inverting cabins” is also one of the reasons for the skyrocketing price of shipping.
Liu Guofeng, the person in charge of a freight company in Huizhou, revealed: “The international shipping prices are now too high and cannot be separated from the middlemen’s hype. From the inflow of containers into the market, some capital or consortiums use their capital advantage to monopolize this resource. Hand-to-hand, middlemen keep changing hands to push up container prices. When a container reaches the enterprise terminal, at least three or four middlemen must raise the price.”
Zeng Yuanli said: “A section of the box (container) is money. When it comes to the box, it is sold for a few thousand yuan.”
Liu Long’s company produces water pumps and small generators, which are sold in Yiwu, Zhejiang. In addition to not being able to grab the container, Liu Long also complained that the freight forwarding company (Note: The foreign consignee designated a freight forwarder at the port of departure to handle the shipper’s sea/air booking and land transportation, customs declaration, commodity inspection, etc.) for the shipper’s export products. Related matters) Sitting on the ground with the transportation company and starting the price, “we have to make a relationship and make money”, “warehouse fees, space fees, and there are so many messy names. I have been in foreign trade for more than ten years, and I have never heard of it. Through these things”.
The sea freight is higher than the value of the goods, and the business management “several happy and sad”
Sea container logistics are tight, and freight rates have soared, which has brought a lot of impact on my country’s foreign trade industry.
Ma Huiguang, who is engaged in foreign trade service industry, said that if foreign trade companies adopt FOB (Offshore Price) terms, the freight will eventually be absorbed by overseas traders, rather than domestic companies.
Ma Huiguang also introduced that, generally speaking, in Ningbo, foreign trade designated freight forwarding companies are responsible for the agency, and manufacturing companies only take care of production. “As long as the designated freight forwarding company places an order, even if the freight rises to the sky, our company can still produce with peace of mind, as long as the specified time is met. 、I don’t care about the production and delivery of the specified quality.”
Gu Shaoyong also said that his company uses FOB (free on board) terms for settlement, and the increase in shipping prices has little effect on the company’s profits.
Liu Long said that most of his company’s products use FOB clauses, and some of them use CIF (CIF) clauses—”all freight will be borne by us.” When it comes to the business chain of a manufacturing company, “everyone is a grasshopper on a rope, and the costs and risks must be shared.”
Liu Guofeng shared a case with a reporter from China Economic Weekly.
In the two years of 2019 and 2020, in order to meet the demand of the Christmas market abroad, August and September each year is the peak season for container booking. Wang Wei, a customer served by Liu Guofeng’s company, has 20 to 30 containers going to sea almost every day.
But when I met Wang Wei the most recently, Liu Guofeng discovered that due to the soaring cost of shipping, Wang Wei’s hundreds of employees had been laid off to a dozen people. Containers, we can see from this, what the cost of shipping logistics has soared!”
This has a particularly strong impact on cross-border e-commerce. The person in charge of a cross-border e-commerce in Hunan said that cross-border e-commerce is on Amazon, EBay and other overseas platforms sell goods directly, and the freight must be borne by yourself.
Wang Kai told the reporter of China Economic Weekly that his company misjudged the situation at the beginning of the year regarding the trend of the logistics market this year: The management originally thought that foreign trade exports would grow in a curve. However, starting from April 1st, domestic goods Export and logistics costs have risen linearly, until the value of exports by some small enterprises cannot cover logistics costs.
Ma Huiguang said that this situation often occurs in Ningbo now. Electromechanical high-value products are okay, but a 40-foot container, if it is clothing, sometimes the total value is 10,000 US dollars, and the freight to the United States is 16,000 to 17,000 US dollars. .
The high logistics costs have made some small and medium-sized enterprises “daunt” their exports.
Recently, Mo Xiaoguang, the person in charge of a small and medium-sized enterprise that produces Bluetooth headsets in Guangdong, faced the dilemma of “not daring to ship when the stock is available”. The annual sales scale of Mo Xiaoguang’s factory is about 100 million yuan. Relying on the profit point of 4% to 5%, the company’s life in the first two years has been “comfortable”, and the change will occur in 2021.
”As the cost of shipping logistics continues to rise, a large number of Bluetooth headsets produced are stored in warehouses. After removing the cost of shipping, there is no money at all.” Mo Xiaoguang told China Economic Weekly that the company did not dare to expand due to the pressure of capital turnover. Production capacity, spread the stalls and die faster.
At the regular press conference of the Ministry of Commerce held on August 26, the spokesperson of the Ministry of Commerce Gao Feng introduced that the peak period of Christmas supplies shipments is usually from June to August every year. However, considering the risk of sea transportation detention, overseas customers generally approved this year. Orders are placed in advance through online inspection and order signing. Some orders have been shipped and delivered earlier than in previous years. Some orders are backlogged in domestic warehouses due to difficulties in booking space or excessive freight, which puts pressure on business operations.
It is worth noting that in the hot market of the container shipping market, the overall performance of shipping companies has exploded- Bohai Ferry(603167.SH) The net profit in the first half of the year was 119 million yuan, a year-on-year increase of 9441%; COSCO SHIPPING Holdings(601919.SH) net profit in the first half of the year was 37.1 billion yuan, a year-on-year increase of 3162%; CIMC (000039.SZ) had a net profit of 4.3 billion yuan in the first half of the year, a year-on-year increase of 2451%.
On September 16, the global shipping leader Maersk sharply raised its third quarter and full-year performance forecast for 2021. The company expects actual earnings before interest, taxes, depreciation and amortization (underlying EBITDA) to be US$7 billion and actual earnings before interest, taxes, depreciation and amortization (underlying EBIT) to US$6 billion in the third quarter. In addition, Maersk has also substantially raised its 2021 performance forecast. In 2021, the actual EBITDA will be 22 to 23 billion U.S. dollars, and the actual EBIT will be 18 to 19 billion U.S. dollars.
How to solve the “hard to find a box” dilemma?
Wang Kai said frankly that since the beginning of this year, the most pressing problem reported by customers is that logistics costs have risen too fast and too drastically. In the face of soaring logistics prices, industry associations such as shipping and shipping seem to be powerless. It seems that no one can leverage the pricing mechanism of airlines and shipping companies.
”If the State Administration for Market Regulation or the National Development and Reform Commission also interviewed leading shipping and shipping companies like steel companies and iron ore companies, domestic logistics costs may drop to a certain extent.” Wang Kai suggested.
Regarding some capital speculation on containers for profit, Liu Guofeng believes: “The reason why the price of containers is a few a day is because of the huge demand in the foreign trade market. There are also the problems of unbalanced supply and demand of transportation capacity and space. But we only need to increase the number of containers and the price of boxes. It will naturally come down.”
How long will port congestion and rising shipping prices last?
In response to the soaring cost of shipping logistics and the “difficult to find one box”, on June 24 this year, Deputy Minister of Transport Zhao Chongjiu revealed that the Ministry of Transport is currently working with relevant departments to guide international liner companies to continue to increase the supply of shipping capacity for mainland China export routes. At the same time, improve the turnover efficiency of containers, and guide the local transportation departments to ensure the stability and smooth flow of the international logistics supply chain while doing a good job in epidemic prevention and control.
On August 26, Gao Feng introduced that the phenomenon of tight capacity and high freight rates is global. The Ministry of Commerce, in conjunction with the Ministry of Transport, the Ministry of Industry and Information Technology, and the State Administration for Market Supervision, has actively taken measures to increase container supply, increase shipping capacity, and strengthen international cooperation.
On September 8, the official website of the US Federal Maritime Commission (FMC) revealed that the Ministry of Transport of China, the US Maritime Commission and the European Union held a global shipping supervision summit to discuss the issue of abnormally high global shipping prices and container prices.
On September 9, French CMA CGM (CMA CGM), the world’s third largest shipping company, publicly stated that it would freeze the freight rate of the futures container until February 1, 2022. CMA CGM stated that when faced with an unprecedented situation in the shipping industry, the company puts its long-term relationship with customers in a more important position.
Since then, Maersk, the world’s largest shipping company, and Hapag-Lloyd, the world’s fifth largest shipping company, have also stated that they “no longer increase freight rates.”
The release of domestic container production capacity will also help ease the pressure. According to Fu Linghui, a spokesperson for the National Bureau of Statistics, from January to August, shortcomings in the domestic industrial chain and supply chain accelerated to make up, and the output of metal containers, which was in short supply in the market, increased by 1.7 times.
Many industry insiders interviewed by China Economic Weekly unanimously emphasized that this year’s port congestion is not domestic congestion, but foreign port congestion. When it can be alleviated, the situation remains to be controlled by the epidemic. In addition, several people mentioned that, compared with China’s vigorous investment in port construction in recent years and actively promoting the advancement of port technology and equipment, an important reason for the low efficiency of ports in Europe and the United States is the aging of equipment, which urgently needs to be updated. However, this problem is not a short-term issue. Can be solved.
In March of this year, Mai Boliang, Chairman of CIMC Group , predicted that global container demand is expected to hit a record high this year, and the tight supply situation may continue into August and September. At the same time, container prices will also remain at a high level. “Our judgment is that there will not be a significant drop within this year.” The reason is that the global epidemic is still continuing, and the price of raw materials has also risen.
On September 3, CIMC said in answering investors’ questions that the container industry will not always maintain a high boom and there will be a callback, but the magnitude will not be particularly large. Because global trade continues to grow every year, the base of container shipping demand is getting bigger and bigger.
Some merchants who have been deeply involved in the foreign trade market have put forward their own opinions based on the laws of the market and the industry. On September 10, Liu Jun, head of a cross-border e-commerce business in Guangdong, told China Economic Weekly, “For cross-border e-commerce sellers, logistics costs have soared by nearly 10 times compared with two years ago. It is indeed too fierce. But in the long run, this increase in shipping logistics costs is unsustainable. As the overseas epidemic stabilizes and foreign trade demand declines, logistics costs will return to a reasonable price range in 3 to 6 months.”
However, September 16, the world’s second-largest container shipping company, Mediterranean Shipping bursts of two notice of price increases, starting from October 15, from Guohua south, Hong Kong shipping to America West, US East Coast ports (GRI) , Peak Season Surcharge (PSS) and Port Congestion Charge (CGS) have all been raised. Among them, the total increase of 20-foot containers is US$6,800, and the increase of 40-foot containers is US$9,188.
Ma Huiguang said: “You can’t live anymore.”
(At the request of interviewees, Zeng Yuanli, Liu Long, Zhang Wei, Wang Wei, Mo Xiaoguang, and Liu Jun are pseudonyms)
(Source: China Economic Weekly)
