Auto & Transportation

The saying "golden nine and silver ten" used to apply to the global shipping industry, but in this year's traditional peak season, the shipping market has suffered from cold snaps. Freight rates on major shipping routes have plummeted "cliff-like", and container shipping analysts say that the backdrop of the global recession, driven by soaring energy prices and rising inflation, is weighing on the shipping market, and such a decline is likely to continue until next year. What impact will this change have on Chinese international trade companies?

Can Chinese Christmas goods be delivered to Europe on time?

According to data released by the Shanghai Shipping Exchange on the 9th, the Shanghai Export Containerized Freight Index was 2,562.12 points, down 10% from the previous issue and declining for 13 consecutive weeks. It has fallen in 30 of the 35 weekly reports released by the agency this year.

According to data from the Baltic Shipping Exchange, in January this year, the price of a 40-foot container on the route from China to the U.S. west coast was about US$10,000, and in August the price was about US$4,000, a 60% drop, compared with the highest point of 20,000 last year. The average dollar price fell by more than 80%. The market of Thailand-Vietnam route in Southeast Asia fluctuates greatly. Due to the large gap in freight demand on the route, it fell by 37.1% in a single week. The spot market booking price dropped sharply, and there was even a small amount of zero freight and negative freight.

According to data from Freight Waves, a supply chain platform agency, at present, it is difficult to see hundreds of ships waiting in long queues at world-renowned ports such as Los Angeles, Boracay, and Rotterdam. As of August 29 this year, the Port of Los Angeles had 50,176 containers, while in late November last year, the number was as high as 90,397; on that day, only 8 container ships were waiting at sea to call at ports near Southern California, while the same number last year At the time, the number was 48 ships.

As the Christmas season is getting closer, many traders are beginning to worry about whether Chinese Christmas goods can be delivered on time. You Dan, a Hamburg trader, said that before the epidemic, he went to Yiwu, China and other places every year to buy Christmas goods such as Christmas decorations, toys and bicycles. In the first two years, due to the epidemic and supply chain disruptions, business was severely affected. This year, the situation of China-Europe shipping has improved, and shipping prices have dropped, which is a good thing for international traders. The bad news is that the euro has fallen and commodity prices have risen. Fortunately, China's prices have not seen inflation as high as that of Europe and the United States.

"Although Europeans are now in low consumer sentiment due to high inflation, Christmas is still coming, and there is still a huge demand for Chinese goods." Youdan said that Chinese goods still have a great deal of value in various indicators such as price, variety and quality. The advantages. Although the survey showed that more than two-thirds of German companies expect problems with deliveries in December, he still believes that, according to the current situation of sea freight, it will be better than last year.

From abnormally high to normal

What caused the plummeting sea freight prices? Ding Chun, a professor at the Institute of World Economics at the School of Economics at Fudan University, said that high inflation rates in Europe and the United States, combined with geographic conflicts, energy crises and epidemics, have led to a sharp decline in shipping demand, which is the main reason for the plummeting global ocean freight rate. Ding Chun believes that although the current slump is to bring last year's abnormally high freight rates back to a relatively normal level, "it means that the era of sky-high freight rates for ocean freight has come to an end."

Kang Shuchun, chief executive of China International Shipping.com, said the imbalance between supply and demand has caused ocean freight rates to plummet. During the epidemic, due to the breakage of the supply chain, the supply of certain materials in some countries was cut off, and there was a "stocking tide" in many countries, which also led to the occurrence of abnormally high shipping costs last year. This year, due to the high inflationary pressure in the global economy, demand has declined. At the same time, the previously hoarded inventory cannot be digested by the market, which has caused European and American international trade importers to reduce or even cancel commodity orders, and the "order shortage" has spread around the world.

In August of this year, Walmart said it was canceling billions of dollars in orders; shortly thereafter, another retailer, Target, said it had canceled more than $1.5 billion in orders. Kang Shuchun said that, as the front-end part of the logistics system, these retailers are the most sensitive to market trends, and their large-scale cancellation of orders means that the purchasing power and consumption power of European and American countries are shrinking.

Xu Kai, chief information officer of Shanghai International Shipping Research Center, said that the big data of port and shipping shows that in the third quarter of last year, about 30% of the world's container ships were parked, and this proportion dropped to about 26% in the same period this year, which shows that the global shipping turnover Capacity has improved; on the other hand, the demand for shipping capacity in global commodity international trade has declined, so it is inevitable that freight rates will fall.

In addition, the large number of new ships launched by the shipping giants has exacerbated the gap between supply and demand. Kang Shuchun said that the extremely high freight costs last year made many shipping companies a lot of money, and some large shipping companies invested their profits in new ships. Before the epidemic, the global shipping capacity was already higher than the shipping volume. The Wall Street Journal quoted energy and shipping consultancy Braemar as saying that a slew of new ships will be launched over the next two years, with net fleet growth expected to exceed 9% next year and 2024, while year-on-year growth in containerized freight volumes is slated for 2023. It will turn negative in 2018, which will further exacerbate the imbalance between global capacity and traffic.

Chinese companies should avoid internal price wars

Due to the many uncertainties in the international political and economic situation, shipping rates are likely to fall further in the rest of this year and into next year. Kang Shuchun said that although the current ocean freight rate has plummeted, it is still slightly higher than the level before the epidemic. Considering the current high global inflation rate, soaring oil prices, rising prices and other factors, the current freight rate is within a reasonable range. However, judging from the current global economic situation, the downward trend of sea freight freight is certain, but it is difficult to draw a conclusion to what extent and when the limit will fall.

Xu Kai believes that the abnormally high ocean freight rates last year were abnormal, and this year's rapid plunge is even more abnormal. It should be the overreaction of shipping companies to market changes. He said that many liner companies have launched new container ships this year, and the turnover capacity is very abundant, but the global shipping booking demand is shrinking. To maintain cargo loading rates on liners, shipping companies try to leverage freight rates to leverage demand. However, the essence of the sluggish market transportation demand is the shrinking of trade demand. The price reduction strategy will not bring any new demand, but will lead to vicious competition and disrupt the order of the shipping market.

"A moderate decline in international shipping costs is reasonable, but the continued slump is not conducive to the normal development of the entire market." Xu Kai believes that the future shipping costs will not decline and stabilize below the level of 2019, returning to slightly higher or close to 2019. The level is a more rational interval. Xu Kai revealed that at the beginning of the year, many shippers signed long-term agreement prices with shipping logistics companies in order to avoid the difficulty of finding a box again, but now the market spot freight is much lower than the signed price. If domestic shipping logistics companies blindly follow price cuts, it will not only damage the interests of cargo owners, but also be unfavorable for long-term cooperation, and price cuts will not bring about an increase in transportation demand. waiting for new business."

Xu Kai also said that the situation of "hard to find a box" of international trade export enterprises will definitely not happen again this year, but this does not mean that it will send a positive signal of profitability to the manufacturing industry. Among the key factors affecting a company’s earnings, the freight rate accounts for a very small proportion, usually within 1% of the value of the containerized cargo. For domestic export enterprises, Xu Kai believes that the more important thing is the international competitiveness and sales volume of goods, while the economic recession in Europe and the United States, inflation has intensified, and at the same time, the over-ordered goods last year will still be digested for a period of time, and the decline in purchasing power will continue for a period of time. "To solve this pain point, the first is to strengthen regional integration, improve the transnational management capabilities of my country's supply chain logistics, and open up the supply chain blocking points; the second is to cultivate more excellent Chinese-funded multinational enterprises and brands, and improve manufacturing products. Design, innovation and R&D capabilities can help China get rid of the label of being just a 'world factory' and promote high-quality products 'intelligently made in China' to attract more international consumer demand." Xu Kai said.