The "golden nine silver ten" argument in the global shipping industry used to be equally applicable, but in this year's traditional peak season, the shipping market is suffering from a burst of cold. The main shipping lines of freight "precipitous" plunge, container shipping analysts said, in energy prices and rising inflation, driven by the global economic recession background is dragging down the shipping market, and such a decline is likely to continue into next year. What impact will this change have on Chinese products and Chinese companies? The Global Times reporter investigated this.
Can Chinese Christmas goods be delivered to Europe on time
According to the data released by Shanghai Shipping Exchange on the 9th, the Shanghai Export Container Composite Tariff Index was 2562.12 points, down 10% from the previous period and down for 13 consecutive weeks. In the 35 weekly reports released by the agency this year, there have been 30 weeks of decline in the data.
Another according to the Baltic Shipping Exchange data show that in January this year, China to the United States West Coast route 40-foot container price of about 10,000 U.S. dollars, the price of about 4,000 U.S. dollars in August, a plunge of 60%, compared to last year's peak of 20,000 U.S. dollars average price, a drop of more than 80%. Southeast Asia Thailand-Vietnam route market is more volatile, due to the route freight demand gap, a single week fell 37.1%, the spot market booking prices fell sharply, and even a small amount of zero freight, negative freight situation.
Data from Freight Waves, a supply chain platform agency, said it is now difficult to see long lines of hundreds of ships waiting to berth at well-known global ports such as Los Angeles, Boracay and Rotterdam. As of Aug. 29 this year, the Port of Los Angeles had 50,176,000 containers, compared with 90,397,000 in late November last year; on that day, only eight container ships were at sea waiting to call at ports near Southern California, compared with 48 at the same time last year.
As the Christmas season gets closer, many traders are starting to worry about whether Chinese Christmas goods will arrive on time. Hamburg trader Yudan told the Global Times special correspondent in Germany that before the epidemic, he went to Yiwu, China, and other places every year to purchase Christmas decorations, toys, bicycles and other Christmas goods. In the first two years, business was seriously affected because of the epidemic and the break in the supply chain. This year, the shipping situation in China and Europe has improved, and the price of shipping has dropped, which is good for traders. The bad news is the devaluation of the euro and the increase in commodity prices. The good news is that prices in China have not seen inflation as high as in Europe and the United States.
"Even though Europeans are now in a low consumer mood because of high inflation, Christmas is still coming and demand for Chinese goods is still high." According to Yudan, Chinese goods still have a great advantage in various indicators such as price, variety and quality. Although the survey shows that more than 2/3 of German companies expect problems with deliveries in December, he still thinks that with the current situation of shipping, it will be better than last year.
From abnormally high to normal
What caused the plunge of sea freight prices? Ding Chun, a professor at the Institute of World Economics, School of Economics, Fudan University, told the Global Times that high inflation rates in Europe and the United States, combined with geopolitical conflicts, energy crises and epidemics, have led to a sharp contraction in shipping demand, which is the main reason for the plunge in global shipping rates. Ding Chun believes that although the plunge now is to pull the abnormally high freight rates last year back to a relatively normal level, "but it means that the era of sky-high sea freight rates has come to an end".
Kang Shuchun, CEO of China International Shipping Network, told the Global Times that the imbalance between supply and demand led to the plunge in ocean freight rates. During the epidemic, due to supply chain disruptions, some countries have cut off the supply of certain materials, and many countries have "hoarding tide", which also led to the occurrence of abnormally high shipping costs last year. This year, due to global economic inflationary pressure, demand fell, at the same time, the previous stockpile of inventory market can not digest, so that the European and American importers to reduce or even cancel the order of goods, "order shortage" spread in the world.
In August, Wal-Mart said it canceled billions of dollars in orders; shortly thereafter, another retailer Target said it canceled more than $1.5 billion in orders. Kang Shuchun said, as the front end of the logistics system, these retailers are the most sensitive to the direction of the market wind, they cancel orders on a large scale means that the purchasing power and consumption power of Europe and the United States are shrinking.
Xu Kai, chief information officer of Shanghai International Shipping Research Center, told the Global Times that the big data of port and shipping showed that in the third quarter of last year, about 30% of global container ships were at berth, and this ratio dropped to about 26% in the same period of this year, which shows that the global shipping turnover capacity is improved; on the other hand, the demand of global commodity trade for capacity has dropped, therefore, the lower freight price is inevitable.
In addition, the shipping giants launched a large number of new ships to intensify the gap between supply and demand. Kang Shuchun said, last year's abnormally high freight rates let many shipping companies make a lot of money, some large shipping companies will profit into the new shipbuilding only, and in the epidemic before, global shipping capacity has been higher than the volume. The Wall Street Journal quoted Braemar, an energy and shipping consulting firm, as saying that a series of new ships will be launched in the next two years, and the net fleet growth rate is expected to exceed 9% next year and in 2024, while the year-on-year growth rate of container cargo volume will turn negative in 2023, which will make the imbalance between global capacity and volume further increase.
Chinese companies should avoid internal price wars
The Wall Street Journal believes that shipping rates are likely to fall further in the remainder of this year and into next year due to the many uncertainties in the international political and economic situation. Kang Shuchun told the Global Times that although shipping rates have plummeted so far, they are still slightly higher than the level before the epidemic. Taking into account the high global inflation rate, soaring oil prices and rising prices now, the current shipping rates are considered to be within a reasonable range. However, from the current global economic situation, the downward trend of ocean freight is certain, but to what extent and when it will stop is difficult to make a definite conclusion.
According to Xu Kai, the abnormally high freight rates last year were anomalous, while the extremely rapid plunge this year was even more anomalous and should be the shipping companies' overreaction to the market changes. He told the Global Times that many liner companies have launched new container ships this year, and the turnover capacity is abundant, but the global demand for sea freight bookings is shrinking. In order to maintain the cargo loading rate of the liner, shipping companies try to use freight rates as leverage to pry demand. But the essence of low market demand for transportation is shrinking trade demand, and using the strategy of reducing rates will not bring any new demand, but will lead to vicious competition and mess up the order of the maritime market.
"The moderate decline in international shipping costs is reasonable, but the continued plunge is not conducive to the normal development of the entire market", Xu Kai believes that future shipping freight rates will not fall and stabilize below the 2019 level, returning to a level slightly above or close to 2019 is a more rational range. Xu Kai revealed that at the beginning of the year, many shippers signed long-term agreement prices with maritime logistics companies in order to avoid the situation that a box is difficult to find again, and now the market spot freight rates have been much lower than the signed prices. If the domestic shipping logistics enterprises blindly follow the price reduction, not only will damage the interests of shippers, but also not conducive to long-term cooperation, and price reduction can not bring about an increase in transport demand, "rather than playing price war to improve the level of service, or develop new business such as speed shipping, cargo logistics, etc.".
