Sea freight rates have skyrocketed, "one cabin is hard to find" has reappeared, and the backlog of foreign trade goods is serious

CBN

2024-05-13 15:23Posted on the official account of Shanghai Yicai

"At the end of May, the space was basically gone, and now there is only demand and no supply." Ji Sen (pseudonym), the head of a large-scale freight forwarding company in the Yangtze River Delta, told Yicai that a large number of containers are "wandering outside", the port has a serious shortage of containers, and "one cabin is hard to find" again.

Under such a shortage, the price increase seems logical. "In early May, the U.S. line (freight rate) was almost $4,100 a container (40-foot container), which has risen twice in a row, each time by about $1,000!" Gisen estimates that the price increase will continue and will soar above $5,000 in late May. This also means that the increase in this wave of freight rates will be exponential.

According to data provided by data agency Freightos, since the end of April, container rates from Asia have increased by about $1,000/FEU (40-foot containers), bringing the price to about $4,000/FEU to the West Coast and Northern Europe routes, to about $5,000/FEU to the Mediterranean route, and to $5,400/FEU to the East Coast route to the United States.

In fact, at the beginning of April this year, shipping companies have announced price increases, but they are a little weak due to the impact of actual demand. Unexpectedly, the situation reversed, the shipowners raised prices as they wished, and Maersk even bluntly said, "Compared with our competitors, our new ship orders are still less."

The backlog of goods is serious, and the container is back in the boom range

The lack of containers, lack of space, and soaring prices have made freight forwarders and foreign trade enterprises cry out "uncomfortable".

"Liquidation, lack of cabinets, a mess. Forwarders and shippers are very uncomfortable. Wang Zhicong, director of the marketing department of Shenzhen Baosen Santong Logistics Co., Ltd., told the first financial that the shortage of containers spread from the beginning of Ningbo Port to Shanghai Port, and now there is a shortage of supply in major ports across the country.

"It's a big increase, it's uncomfortable." The person in charge of a freight forwarding company in Zhejiang told Yicai that at the moment of tight supply, he did not feel a significant rebound in business. On the contrary, affected by the reappearance of frantic freight rates, the recent business volume has been forced to decline a lot due to the pressure of price increases.

For foreign traders, the impact is also intuitive. Recently completed goods have to be delayed and the backlog is serious.

"Whether it's the Middle East, Europe, or South America, the shipments to various places are basically delayed!" Ding Yandong, a foreign trader, told Yicai that there are currently about 4 containers of goods that have been postponed, and the latest has been delayed by nearly a month than the original time, "what was supposed to be sent in late April has not yet been sent." Slow delivery will inevitably correspond to slow order returns, and it is also likely to affect the scale of subsequent orders.

Compared with the "uncomfortable" of freight forwarders and foreign traders, shipping companies and container manufacturing enterprises seem to be comfortable again. While Maersk lamented that there were fewer orders for new ships, the latest prosperity of the container industry has returned to the boom range from the original transition range.

As a global container manufacturing leader, CIMC's container business recovered significantly in the first quarter of this year, and the sales volume of dry cargo containers increased nearly 5 times year-on-year. CIMC predicts that this year's container manufacturing volume has the opportunity to exceed 3 million TEU (20-inch standard containers), and the overall industry outlook is better than last year. COSCO SHIPPING Development, whose core business is container manufacturing, also saw its operating income increase by about 40% year-on-year in the first quarter of this year, driven by the recovery of its container business.

According to the data released by the Shanghai Shipping Exchange on May 10, China's export container freight index was 1237.84, up 3.7% from the previous period; The Shanghai Export Container Comprehensive Freight Index was 2305.79 points, up 18.8% from the previous period.

The impact of the Red Sea situation on the detour has accumulated, and demand has picked up

Behind this wave of "madness" is still attributed to the imbalance of supply and demand - on one end is the shortage of capacity supply, and on the other end is the recovery of market demand.

The reasons for the tight supply are multiple. The main thing is that the impact of the deviation caused by the situation in the Red Sea continues to accumulate.

According to Freightos, the circumvention of container ships to the Cape of Good Hope has led to a tightening of capacity on large shipping networks, even affecting freight rates on routes that do not pass through the Suez Canal.

Since the beginning of this year, tensions in the Red Sea have continued, forcing almost all container ships to abandon the Suez Canal route and sail around the Cape of Good Hope in Africa instead. This corresponds to a longer voyage, about two weeks longer than before, and also leaves a large number of ships and containers adrift at sea.

"The burn-out effect of the Red Sea still has a lot to do with it." The relevant person in charge of the global freight forwarding giant Dexun told Yicai that at the same time, the capacity allocation control of shipping companies has also exacerbated the supply shortage. Considering the possibility of tariff increases in the United States and other places, many buyers have also launched pre-stock, "shippers ship in advance", which are mainly automobiles and some retail products. Coupled with the risk of strikes in many places in Europe and the United States, the tightness of sea freight supply continues to escalate.

In the opinion of the above-mentioned person in charge, "last year's market was not prosperous in the peak season, there was no peak season, and this year the peak season was advanced, (especially) Latin American routes have gone crazy."

According to data from the General Administration of Customs, the mainland's foreign trade maintained an upward trend. In the first four months of 2024, the total value of mainland trade in goods was 13.81 trillion yuan, a year-on-year increase of 5.7%. Among them, exports increased by 4.9% and imports increased by 6.8%. In dollar terms, imports and exports, exports and imports also increased by 2.2%, 1.5% and 3.2% year-on-year, respectively, in the first four months; Looking at the monthly data, imports, exports and exports increased by 2.4% and 4.6% month-on-month in April.

In terms of destinations, in terms of renminbi, the mainland's exports to ASEAN, its largest trading partner, and the United States both increased in the first four months of this year, up 10% and 2.4% year-on-year, respectively. Exports to Latin America increased by 11.4% year-on-year, with exports to Brazil increasing by 24.6%.

The report of Zhuo Hong, the overseas head of the macro team of Industrial Securities, and others pointed out that the United States has ended the destocking cycle that lasted for a year and a half and began to replenish the inventory. As interest rates peak and fall in 2023, demand for goods in the United States has begun to pick up again, the manufacturing PMI (purchasing managers' index) has recovered, and the divergence with the service sector has also narrowed significantly. China can benefit from the pick-up in demand for U.S. goods. On the one hand, the drag on the contribution of U.S. imports from China has narrowed significantly; On the other hand, ASEAN and other economies need to use a large number of intermediate goods imported from China in their exports to the United States, and ASEAN intermediate goods are becoming more and more dependent on China, so China can also benefit indirectly. Among them, equipment, furniture, textiles and other industries with high dependence on China's exports have all shown signs of replenishment.

According to customs statistics, in the first four months, the mainland's exports of mechanical and electrical products accounted for nearly 6% (59.2%) of the country's exports, and labor-intensive products accounted for 17%, an increase of 6.9%. Among them, the export of automobiles (including chassis) increased by 24.9 percent, an increase of 3.2 percentage points from the growth rate of 21.7 percent in the first quarter, and the export of ships continued to surge, with an increase of 108.4 percent.

Lv Daliang, director of the Department of Statistics and Analysis of the General Administration of Customs, said that in the first four months of this year, the growth rate of imports and exports accelerated compared with the first quarter, and the scale hit a new high in the same period in history, and the mainland's foreign trade was further consolidated. Tu Xinquan, dean of the China Institute of World Trade Organization Studies at the University of International Business and Economics, said in an interview with the media that the foreign trade data for the first four months exceeded most people's expectations. Both imports and exports have increased significantly, which shows that domestic investment and consumption demand are rising, and also reflects that the current world economic recovery is better than expected, and the competitiveness of the mainland's overall exports is still improving.

"The increase in demand has been somewhat more than expected." However, due to the sharp rise in freight rates, their recent business volume has only rebounded slightly, Ji Sen said. In his opinion, international freight rates will continue to rise before June this year.

Drewry, a well-known British shipping consultancy, also expects that China's freight rates will continue to rise in the coming week due to huge demand surges and tight capacity.

As far as the trend of foreign trade is concerned, Tu Xinquan said that due to the rise of trade protectionism in some countries, the external environment facing the mainland's foreign trade is becoming more and more complex, and the challenges are also multifaceted. To this end, on the one hand, it is necessary to strive to stabilize foreign trade relations with relevant countries through various ways and create the best possible foreign trade environment for enterprises; On the other hand, it is also necessary to accept the reality and actively implement and realize the diversification of the market. In addition, with economic development, the mainland's dependence on foreign trade will decline to a certain extent, and we should also look at this change with a normal mind.

(This article is from Yicai)