General

According to the observation of import and export data from Huacheng, the freight rates of important global sea routes have significantly decreased. According to a report released by the Shanghai Shipping Exchange on February 18th, freight rates on multiple routes such as the European route and the Australia New Zealand route have declined. The sea freight price directly affects the trade cost and order demand of large consumer goods in China. In this regard, experts believe that due to the Russia-Ukraine conflict, rising oil prices, epidemic situation and other factors, the sea freight price will rise sharply in 2022. In 2023, the sea freight price will gradually return to the normal level, and the overseas orders and exports of large consumer goods such as household appliances, bicycles will also gradually recover.

Falling freight rates

The freight rates on important global routes have significantly decreased. According to the weekly report on the export container transportation market released by the Shanghai Shipping Exchange on February 18th, freight rates on multiple routes such as the European route and the Australia New Zealand route have declined.

Narrow the observation range to one week, and the drop in freight rates is also visible to the naked eye. According to the Tianjin International Trade and Shipping Service Center, in the 6th week of 2023 (February 6-10), the Tianjin Shipping Index continued its previous trend of fluctuating and weakening, with a cumulative decline of 16.36 points, breaking the 1000 point mark.

The rise and fall of sea freight prices also directly affect the trade costs of many goods. According to Huacheng Import and Export Data Observation, Ms. Cheng, a staff member of a freight forwarding company in Tianjin, told Beijing Business Daily that there was a visible slight decrease in freight rates in the first two months of this year alone. Our main focus is on the Japan South Korea route, and compared to a year ago, the freight rates for high and small container containers on these routes have decreased by approximately $40-55. "Ms. Cheng introduced.

Throughout the year, the decrease in freight rates is more pronounced. Li Zhihui, the manager of the foreign trade department of a certain electrical appliance company in Ningbo, Zhejiang, introduced in a media interview that a 40 foot high container can hold approximately 216 washing machines. Last March, the highest point of sea freight was around $18500 per standard container, which is about $85 per washing machine. In February of this year, the sea freight was $4500, which is about $20 per product. "Li Zhihui said, according to Huacheng Import and Export Data Observation.

"Due to factors such as the Russia-Ukraine conflict, rising oil prices, and the COVID-19, shipping prices will rise sharply in 2022. However, in 2023, the world economy will face the risk of recession, and shipping prices will gradually return to the normal level." Hong Yong, an expert of the 50 person Forum on China's Data Integration, and an associate researcher of the E-commerce Research Institute of the Research Institute of the Ministry of Commerce, told reporters.

Currently, for short-term freight rates, international shipping research and consulting firm Deloitte predicts that spot rates will continue to decline slightly in the coming weeks. Throughout the year, Deloitte mentioned in its market outlook released in January 2023 that spot freight rates in the consolidation market will decrease by at least 50% -60% in 2023. De Lurie predicts that the current price reduction will mean shipping costs closer to pre pandemic levels.

Order recovery

In global trade, sea transportation occupies a very large market, and the demand is stable and huge. From a global perspective, sea freight is one of the most important modes of transportation in international commodity exchange, with cargo transportation accounting for over 80% of the total international cargo transportation volume. From a domestic perspective, about 95% of China's international trade goods are currently completed through sea transportation, including products such as large household appliances and home furnishings.

Large household appliances are one of the products with high technological content and high added value in China's foreign trade products, occupying an indispensable position in China's foreign trade economy. In terms of home products, China's home manufacturing industry is concentrated and has a wide range of furniture types, making it the world's largest home production country and currently the world's largest home export country, occupying an important position in global home export trade, Large consumer goods such as household appliances and home products are generally exported by sea to foreign countries. The soaring freight rates during the epidemic have greatly increased the costs for related enterprises in China, which is not conducive to Chinese enterprises expanding into foreign markets

During the epidemic, multiple factors such as rising freight rates have led to a "bottleneck" for the export of large products in China.

According to data from the China Home Appliances Association, in 2022, the export value of China's home appliance industry reached 97.25 billion US dollars, a year-on-year decrease of 6.9%. The latest export statistics from the General Administration of Customs also show that from January to December last year, China exported 3.366 billion units of household appliances, a year-on-year decrease of 13%.

Let's take a look at home products. According to data from the General Administration of Customs, from January to December 2022, the export value of furniture and its components in China reached 463.93 billion yuan, a year-on-year decrease of 2.5%; The export of ceramic products reached 18.335 million tons, a year-on-year decrease of 1.4%, with an export value of 217.27 billion yuan, a year-on-year increase of 10.2%; The export value of lamps, lighting fixtures, and their components reached 307.35 billion yuan, a year-on-year decrease of 3.1%.

Behind the decline in exports is the helplessness of enterprise goods accumulation. According to media reports, 91 refrigerators have been stacked in the warehouse of a refrigerator production enterprise in Longshan Town, Cixi, Zhejiang for nearly two years. It is reported that both parties signed a contract in December 2020, and the enterprise will complete production in March 2021. According to the contract, the shipping cost is borne by the Israeli purchaser. However, the freight rates for the Middle East route have been increasing, and buyers have repeatedly requested delayed delivery.

Challenges still exist

A reporter from Beijing Business Daily noticed that with the decrease in global freight rates on important routes, China's exports of large products have shown a rapid recovery trend.

For example, in the first two months of this year, many large home appliance production enterprises in Zhejiang experienced rapid growth in orders. In the first two months of this year, the number of orders returned by us has increased by more than 20% compared to the same period last year. Among them, there are orders returned by old customers and new customers joining, and it is expected to increase by 30% compared to the same period last year. "Lu Yaozhong, the general manager of a certain electrical appliance company in Ningbo, Zhejiang, introduced in an interview with the media, and Huacheng's import and export data observation report.

The rebound in exports of large household appliances and home products will benefit various related industries in the industry chain. Hong Yong introduced that the electricity export industry chain includes raw material suppliers, manufacturers, channel providers, logistics service providers, traders, etc. Next, these enterprises in the industrial chain may experience further recovery, including some other professional service companies, such as quality testing companies and consulting service companies, "Hong Yong said.

Focusing on the large consumer products themselves, there are also important incremental markets that can be further explored. Hong Yong's analysis suggests that in the coming years, with further economic development, the consumption of large household appliances and home furnishings in Southeast Asia is expected to continue to grow. At the same time, the quality requirements for products in Southeast Asia will also continue to improve, and they are more inclined to purchase high-quality products.

However, it cannot be ignored that China's export of large consumer goods will also face some challenges. The fierce competition in foreign markets, the political situation abroad, and the increasing demand for product quality from foreign consumers will all have an impact on the foreign trade of Chinese enterprises, "said Hong Yong. At the same time, the industry characteristics that are easily affected by sea freight prices also require relevant industries and enterprises to seek effective "ways out".

Regarding this, Hong Yong suggests that industry associations can establish an effective sea freight price prediction model to accurately predict the trend of sea freight price changes and seize market opportunities. Enterprises should adopt reasonable investment strategies based on the predicted results of industry associations to reduce the impact of fluctuations in ocean freight prices on their revenue and reduce risks. In addition, enterprises can also arrange transportation routes reasonably and actively sign long-term agreements with ocean freight logistics enterprises to reduce ocean freight costs

"In recent years, the economic and trade exchanges between China and the 'the Belt and Road' countries have become closer and closer. The quality of our enterprises' products has been continuously improved, and their products have gradually been recognized. In the future, China's services to foreign trade enterprises will continue to strengthen, while improving relevant laws and regulations, so as to help foreign trade enterprises of large products improve their ability to explore foreign markets and ensure the sustainable development of the foreign trade industry." Hong Yong said, Huacheng Import and Export Data Observation Report.