General

In the warm spring of March, the foreign trade industry inexplicably experienced a cold wind. A large number of overseas customers withdrew orders, "" the overall decline of foreign trade orders in spring 2023 was 40%, "and" empty containers piled up like mountains, a scene that has not been seen in many years "... Fragmentary words and phrases once filled the circle of foreign trade people's friends, and some even questioned the poor effect of overseas order grabbing organized by local organizations, with very few orders being able to be retrieved.

What is the current situation in China's foreign trade industry? Luo Chang, General Manager of Shenzhen Shuoteng Technology Co., Ltd., bluntly stated that the cold wind in March began with the accumulation of empty containers in ports, and the foreign trade industry is still growing positively. However, one reality that needs to be faced is that as the world enters the post pandemic era, the so-called "epidemic dividend" has disappeared, and the foreign trade industry is also returning to normal.

However, in this process of change, different companies may have different feelings about the warmth and coldness of the market. Low value industries are facing greater impact, but this is a need for industrial upgrading. No matter when they cannot keep up with this era, it is inevitable to be eliminated and killed on the beach, "said Cheng Zhen, General Manager of Foshan Xinma Electronic Technology.

01 Port: "Boxes Enough for Ten Years"

As a "barometer" of trade, the changes related to containers have always been closely monitored by the market, from "one box is difficult to find" to empty boxes everywhere, which is also a true feeling of foreign trade enterprises. In 2021, due to the impact of the epidemic, multiple ports around the world were congested, new container equipment production was slow, and container supply was tight, stimulating the manufacturing of new containers. According to a survey by the China Container Industry Association, the overall container production in China was approximately 6.533 million TEUs in 2021, an increase of 107.3% compared to 2020. In addition, the total production and sales of containers in China reached a historical peak of 6.5 million TEUs in 2021, while the previous busiest year saw only over 4 million TEUs in annual production and sales.

During the epidemic, shipping was blocked, and containers used for ten years were built in three years, which could not be digested in a short period of time. Stacking up at ports was foreseeable, "said Luo Chang.

Regarding the reason for the increase in empty containers, General Administration of Customs Director Yu Jianhua also responded at a press conference on March 20th, mainly due to the large amount of new container placement in the early stage, low domestic storage costs, and a large amount of empty containers returning in the short term after the relief of the foreign epidemic.

Yantian Port is the most densely packed port area with international shipping routes in South China. In response to the issue of empty container accumulation, it was stated that after the Spring Festival every year, it is a traditional off-season for foreign trade, and a certain increase in the inventory of empty container piles in the port is a common phenomenon in the industry. Due to the pandemic in the past two years, the global logistics chain has slowed down, and overseas markets have experienced problems such as excessive inventory. The factors of de inventory have led to a delayed recovery in exports from South China after the Spring Festival this year. With the continuous return of empty containers from shipping companies, the number of empty containers in major ports across the country has slightly increased compared to previous years.

In fact, in the first half of 2022, due to the increase in container market ownership and the gradual recovery of container turnover efficiency, the decrease in container demand has been very obvious, which can be seen from the production and revenue situation of container manufacturing enterprises. CIMC Group disclosed in its financial report for the third quarter of 2022 that in the first three quarters of 2022, the production and sales of the group's container manufacturing business showed a decline compared to the historical high of 2021. Among them, the cumulative sales of dry cargo containers were 1.0116 million TEUs (1.9085 million TEUs in the same period last year), a decrease of about 47.00% year-on-year; The cumulative sales of refrigerated containers reached 100800 TEUs (the same period last year: 130000 TEUs), a year-on-year decrease of approximately 22.46%.

COSCO Shipping's container business also experienced a decline in the first half of 2022, with a container manufacturing business revenue of 12.79 billion yuan, a year-on-year decrease of 12.41% compared to the same period in 2021. The cumulative sales of containers reached 575900 TEUs, a decrease of 20.23% compared to 721900 TEUs in the same period in 2021. The price of new containers has gradually declined from its high point in early 2022.

02 Demand: "European single volume halving"

The days of "one box is hard to find" have passed, but foreign trade enterprises have begun to face a phased dilemma of "one order is hard to find" in the second half of 2022, especially in the European market, where foreign trade orders fluctuate greatly.

A foreign trade enterprise exporting home products in Yiwu told Hugo Cross border that the volume of foreign trade orders from Europe in 2022 can be described as "halving", clearly feeling the decrease in demand from European customers, while foreign trade orders from Russia and Southeast Asia are growing rapidly. In 2021, the order amount from European customers was close to tens of millions of US dollars, but in 2022, it was only two to three million US dollars, with a significant difference

Another clothing export company stated that insufficient prediction of industry trends in the second half of last year resulted in a backlog of millions of products in warehouses at the end of the year, with the overall order volume of European customers showing a significant decline.

In 2022, due to the continuous impact of geopolitical conflicts, energy and food prices in Europe continue to rise, and inflation index continues to be high. The high inflation has led to a rapid increase in the cost of living for European people, resulting in a decrease in actual purchasing power and thus curbing consumer demand. Taking the UK as an example, from April to July 2022, inflation levels in the UK continued to reach new highs in 40 years, with the Consumer Price Index (CPI) reaching a peak of 11.1% year-on-year in November 2022.

At the same time, due to the previous tight supply chain, overseas retailers were worried that there was no stock to sell and hoarded a large amount of goods, which became hot potato in 2022. According to a survey conducted by foreign media, almost half of online retailers in the UK are facing inventory surplus after the end of the Christmas and New Year sales season.

Ouchi CEO Liu Mingyang told Hugo Cross border that there was a lack of anticipation for the decline in demand in Europe last year. In addition to the impact of orders, another greater impact was the painful transition to other markets such as Southeast Asia. However, Liu Mingyang also pointed out that overseas demand has begun to recover. One of his European clients sold out of inventory in the warehouse after Christmas last year, and recently asked him if he could compress the product delivery time from 45 days to 20 days because the customer's inventory was a bit tight.

According to data from Alibaba International Station, the demand for foreign trade orders has continued to grow since February, especially since March. This trend of recovery is continuing. On the first day of the New Trade Festival in March, the demand for overseas orders at Alibaba International Station increased by 30% year-on-year.

As demand gradually recovers, the number of empty containers in ports is also decreasing. Data shows that at the beginning of March, there were still about 470000 TEUs of empty containers stored in Ningbo Zhoushan Port. As of March 13th, the number of empty containers stored in the port was about 410000 TEUs, a decrease of 60000 TEUs in two weeks.

03 Industry: "Southeast Asian factories or Chinese people"

Recently, the issue of industrial chain transfer is also the focus of many industrial disputes. Apple, Samsung, and others have shifted some of their production lines to Southeast Asia and India, while Chinese mobile phone manufacturers such as VIVO, OPPO, and Xiaomi have also invested and built factories in Southeast Asia and South Asia. Coupled with recent indirect or direct actions by the United States to "decouple and break the chain", many voices have emerged, such as "China's cost advantage is gradually disappearing", "China's foreign trade orders are being taken away by Southeast Asia", and "Vietnam has become a substitute for China's industrial chain".

Liu Mingyang, CEO of Ochi, has a different view on this. He believes that the greater advantage of Southeast Asia lies in labor costs, with worker salaries of approximately 1200 yuan per month and an average additional expenditure of 3000 yuan per month in China. However, in reality, many factories in Southeast Asia are established by domestic enterprises. "In fact, most of the factories in Southeast Asia are still Chinese people," and raw materials and core technologies are exported from China, while Southeast Asian factories are responsible for assembly.

On the other hand, the process level of local factories in Southeast Asia often fails to meet the requirements, and the product quality is often inferior to that in China. Therefore, Liu Mingyang believes that low-end manufacturing industries, such as electronic processing enterprises and textile enterprises, will be greatly affected by the problem of industrial chain transfer. Other industries will not be greatly affected, and some high value-added industries will benefit from it instead.

Xinma Electronic Technology is a company in Foshan that mainly produces commercial and industrial code scanners. It has previously suspended multiple projects due to the impact of the epidemic, but since the beginning of this year, the projects have restarted and foreign trade orders have significantly increased. It is understood that Foshan Xinma mainly exports to Southeast Asia and Latin America, with a small amount exported to Europe and America.

Cheng Zhen, General Manager of Xinma Electronic Technology, pointed out to Hugo Cross border that Vietnam and Thailand in Southeast Asia, as well as Brazil, Chile, and Mexico in South America, are generally in an upward period of infrastructure construction, so there is a high demand for scanning equipment. Moreover, with the significant adjustment of domestic epidemic prevention and control policies and the global entry into the post epidemic stage, the global machinery industry is recovering, and the demand for code scanners continues to increase.

Although the impact of industrial chain transfer on enterprises has something to do with the nature of the industry, another important reason is that some foreign trade enterprises rely too much on individual customers and have a single customer structure, according to Lai Guoqiang, the general manager of Aidu Clothing Co., Ltd. Within Aidu, there is a red line for the proportion of sales from individual customers, which cannot exceed this proportion.