Container shipping prices soar in the off-season! South American routes surged by 130%, or due to the proposed tariffs on photovoltaics and electric vehicles

Source of this article: Times Finance Author: He Mingliang

Container shipping Image source: Picture Worm Creative

Container shipping prices soared in the off-season.

The Red Sea crisis led to a shortage of shipping capacity, shipping companies suspending sailings to increase freight rates, container shortages, and the recovery of demand on all continents, all of which contributed to the increase in this round of container shipping prices.

"A container is hard to find", "the price of container transportation and shipping is all rising", "dumping the container"...... In this round of early arrival of the tide of container transportation price increases, a number of freight forwarders analyzed the current market conditions they are facing to Times Finance. For small and medium-sized freight forwarders, this round of price increases has not brought too much benefit, and business is more difficult to do.

Rushed to ship to avoid tariffs, and the freight rate of South American routes soared

"The field of container transportation has risen across the board", Wang Qi, a staff member of a freight forwarding company in Shenzhen, told Times Finance; Another freight forwarder who operates the European and American lines also pointed out that the company informed them that the American line rose by 50% this week, and the European line is expected to rise by 40% next week.

According to the data of the Shanghai Shipping Exchange, on May 17, the composite freight index of the Shanghai export container freight index increased by 9.3% from the previous period (May 10) to 2520.76 points.

In terms of specific prices, the market freight rate (ocean freight and ocean freight surcharge, the same below) for exports from Shanghai port to European basic ports increased by 6.3% from the previous period to US$3,050/TEU; The market freight rate of Shanghai port exports to the Mediterranean basic port increased by 1.1% from the previous period to US$3,957/TEU; The freight rates for exports to the basic ports of the West and East of the United States were US$5,025/FEU and US$6,026/FEU respectively, up 14.4% and 8.3% respectively from the previous period.

Among the routes exported from Shanghai Port to various continents, the South American route rose the most, and the market freight rate exported to the basic port of South America increased by 22.4% compared with the previous period, reaching 6686 US dollars / TEU. It is worth noting that on May 10, the above-mentioned routes in Europe, the Mediterranean, North America, South America and other routes have recorded a month-on-month increase of about 20%, and they still maintain a rise this week. The freight rate of Shanghai port exports to South American basic ports has doubled compared with the beginning of the year (January 5), an increase of 130.47%.

In the view of freight forwarders, the reasons for price increases vary in different regions.

Xiaohua, a freight forwarder on the North American line, is soliciting customers on the circle of friends, "The 2024 Amazon Prime Day is finalized, and the warehouse will be closed on June 20. Xiao Zeng, who also has a North American business, believes that many large companies are in a hurry to stock up on Amazon Prime Day and will go directly to the shipping company to order a full container, which will exacerbate the phenomenon of container tension and "dumping".

"Dumping" often occurs in the peak season, the shipping company in order to ensure that the full load of the voyage to pick up more than 120% of the full load of goods, and once the last space is not enough, the shipping company will refuse to carry the excess 20% of the goods with lower freight rates, and arrange it to the next voyage.

"Business is more difficult to do, customers see that the freight is expensive, will also measure more, when not in a hurry, they will wait and see, many shipping companies have 'dumped' situation, the goods are not shipped away." Xiaohua and other small and medium-sized freight forwarders who do general goods told Times Finance that this round of container transportation price increases is not much good for them.

Da Zhuang, who also does online distribution in North America, pointed out to Times Finance that peers with stable customers can better catch up with this round of price increases, "Without stable customers, it will be more difficult to do distribution, and when the freight rate rises quickly, customers will be more sensitive to each company's quotation." ”

In South America, import duties may be imposed.

"Many shipping companies are now increasing the development of the South American market, because South America wants to increase import taxes on electric vehicles and solar panels, so customers want to ship to South America first (to avoid tariffs)." In addition, the U.S. election is imminent, and there is also news that new tariffs will be imposed on Chinese electric vehicles, and many car company customers will send their cars to South America first, and then export them from South America to the United States, which is not considered to be imported from China, and can avoid sanctions. ”

According to the website of China's Ministry of Commerce, Brazil, a large South American country, has decided to impose import taxes on photovoltaic module products, and from this year Brazil will need to pay a 10.8% mercosur tariff on imported solar panels, and in order to adapt the market to the new regulations, relevant agencies have set duty-free quotas that will be reduced year by year until 2027.

Currently, 99% of Brazil's solar panels are imported from China, which means that the sooner Chinese PV companies export to Brazil, the fewer tariff restrictions they will be subjected to.

In terms of electric vehicles, relevant Brazilian media also pointed out that relevant ministries and commissions in Brazil have reached a consensus on raising import tariffs on electric vehicles, and plan to increase the tax rate to 35% by 2026 in a gradual manner; At the same time, zero-tariff import quotas will be reduced year by year until they are eliminated in 2026.

In recent years, China's automobile exports have been booming, and South America is also an important market for Chinese automakers, and container shipping has become one of the alternatives in the case of tight ro-ro ships dedicated to transporting cars.

"For example, BYD, the shipments in recent months have been relatively large, and the company's shipping space in April and May has been occupied by BYD." Wang Qi also pointed out that from her observation, the container shipping capacity in West Africa has also been deployed to South America, and the freight rate of the West African route is also rising.

Data from the Shanghai Shipping Exchange also showed that on May 17, China's export container freight index had the highest increase from last week on South American routes, East and West Africa routes, and South African routes, reaching 15.9%, 14.1%, and 11.7% respectively, to 1091.17 points, 797.83 points, and 1074.40 points.

"Individual points in Africa have reached 10,000 US dollars a box, the increase in April was basically 300 ~ 500 US dollars, and at the end of April, the increase soared to 1,000 US dollars and 2,000 US dollars, while the freight rate of African routes in the previous off-season was only 2,000 ~ 3,000 US dollars. The usual freight rate of the South American route is 2,000~3,000 US dollars, but now it is almost 7,000 US dollars," Wang said.

The Red Sea crisis and container shortages

In addition to the demand of the regional market, many freight forwarders pointed out that the common reason for this round of price increases is the Red Sea crisis and the shortage of containers.

Since the Houthi attack in the Red Sea at the end of 2023, many types of shipping ships around the world have been unable to pass through the Suez Canal-Red Sea, and have to detour through the Cape of Good Hope in Africa, which has directly led to longer voyage cycles and more container capacity to be put into the region.

In an article on May 7, shipping consulting agency BIMCO pointed out that the Red Sea crisis has caused the world to increase its capacity by about 10% to meet global container trade.

BIMCO also said that the capacity delivered in the container transportation sector in 2023 has increased by 37% from the highest level in history, and the delivery of container capacity in the first four months of 2024 has exceeded 1 million TEUs, an increase of nearly 80% from the previous record; In terms of fleet size, new ship deliveries in 2024 will reach 11% of the capacity at the beginning of the year, "Historically, deliveries of this size will lead to a serious oversupply, but this year's deliveries will contribute to the smooth flow of global container trade." ”

And the Red Sea crisis has also brought another problem - a shortage of containers. "The container shipping cycle has become longer, the original 30 days to reach the port of destination is now 40 days, and the time for the container to return to the place of departure has changed from 60 days to 80 days, and the container cannot return to Asia and China in time, resulting in a shortage of containers for many shipping companies."

Wang Qi introduced, shipping companies will generally allocate containers according to the shipping schedule, but at the moment there is still no guarantee of containers, "Recently, our customers often do not have cabinets when they pick up containers, so basically customers have to quickly place orders to pick up containers when they hear that they can pick up containers." If the customer picks up the container in advance, the customer has to bear more related costs, but if the goods cannot be shipped to sea because there is no cabinet, the follow-up shipping schedule can only be arranged, and the freight rate will be higher and the loss will be greater. ”

Wang Qi also pointed out that foreign shipowners are also trapped in the dilemma of container shortages, but large domestic shipping companies such as "COSCO" can mobilize multiple containers in China's hinterland, which will have a slight advantage. Under the same freight rate, if the shipping company does not have a container, it means that the customer's goods cannot be shipped out, so it will be more secure to choose a shipping company with a cabinet. ”

In addition to the above problems, the demand of shipping companies to promote the increase in freight rates in the current contract season cannot be ignored.

Delhi, a shipping consultancy, recently noted that in the five-week period from 13 May to 16 June 2024, 32 sailings on the main east-west routes – the trans-Pacific, transatlantic and Asia-Nordic and Mediterranean routes – have been cancelled, representing a total of 5% of the planned 653 voyages. Of these, about 53% will be on the transpacific eastbound route, 25% on the Asia-Nordic and Mediterranean route, and 22% on the transatlantic westbound route.

In this regard, some industry insiders pointed out to Times Finance that this means that shipping companies may be pushing freight rates up by suspending sailings and reducing capacity.

(The names of the interviewees have been changed)