Since the beginning of this year, China's foreign trade situation has continued to improve, and the demand for international container transportation has grown rapidly. However, as the epidemic continues to rebound in many countries and some overseas ports are congested, the international logistics supply chain has been blocked, the operating efficiency of ships and the turnover rate of empty containers have fallen sharply, and it is hard to get a single container, driving up the price of shipping.

Into the fourth quarter, this phenomenon has eased? Are shipping prices still high? Our reporter visited.

Why container

"One case is hard to get"?

At its worst, the gap in the amount of empty containers imported by sea reached 2 million teU.

According to the Shanghai Hna Exchange's Container-freight Index, the composite index of container-freight rates for China's exports stood at 3,232.37 points on Nov. 12, compared with less than 850 points in May last year.

Demand side

A large number of foreign trade orders were transferred to China. In the first 10 months of this year, China's exports reached 17.49 trillion yuan, up 22.5 percent year-on-year and 25 percent from the same period in 2019, data from the General Administration of Customs showed.

The supply side

More than 96% of dry cargo containers and 100% of temperature-controlled containers are produced in China. Currently, manufacturers are stepping up production, but the number of container production enterprises is still small, and the epidemic has disrupted the pace of container production.

Port congestion, shipping capacity tension, resulting in a cabin difficult to seek.

The "hard to find box" continues

On November 1st five major shipping lines on routes between Asia and the US collectively raised the GRI(Combined Rate Increase Surcharge) for the 21st time this year: an average of more than $1,000 for a standard 40-foot container, for a total of more than $10,000 a container.

Freight rates have soared, hardest hit by low value-added goods. A home-improvement manufacturer in Yiwu, Zhejiang province, said a batch of orders placed in April, which were scheduled for delivery in June, was still sitting in a warehouse in November. Another supply chain management company said: "We have sufficient supplies and are struggling to get shipping space and containers. Currently, the boxes are not coming back from many hardest-hit countries."

Jia Dashan, deputy director of the Water Transport Research Institute of the Ministry of Transport, told our reporter that since the beginning of this year, the container is "hard to find a box" reflected in two aspects.

On the one hand, it is the lack of empty containers. "The export heavy containers of China's international routes are far more than the import heavy containers. In order to maintain container balance, 3 million teUs of empty containers need to be transferred by sea every month, and container balance can be achieved through domestic container manufacturing. The sudden outbreak of the epidemic has had a big impact on global trade. Last year, China's demand for container international routes dropped by 8%. As China took the lead in controlling the epidemic, a large amount of cargo demand began to shift to China. Shipping demand grew rapidly from the second half of last year, reaching 14 percent in the fourth quarter of last year. However, due to the poor circulation of containers abroad and the slowing down of empty containers in sea transportation, empty containers are in short supply. At the worst time, the gap of empty containers imported by sea reached 2 million TEUS, and it was' hard to get a single container '." Jia Dashan analysis.

On the other hand, is the lack of container space. "The epidemic has led to an increase in uneven freight demand and port congestion, which has reduced the efficiency of shipping operations and highlighted the shortage of shipping capacity. In particular, the spot market has become 'difficult to find one space', which has pushed up the container liner freight prices. As the impact of the pandemic continues, port congestion and low ship turnover efficiency are difficult to reverse, and a large number of new shipbuilding cannot be put into use, leading to the continued rise in shipping prices." Jia Dashan said.

According to the Shanghai Hna Exchange's containerized freight Rate Index, the composite index of Containerized freight rates for China's exports stood at 3,232.37 points on Nov. 12, down 1.6 percent from Nov. 5, but the index was still below 850 points in May last year.

Previously, about 90 percent of the world's cargo went by sea because shipping was relatively cheap, costing only one-sixth of air freight. China imported and exported $2,500bn worth of goods via shipping last year, more than air, rail and road transport combined, according to the World Trade Organisation. Now, soaring prices and the costs associated with holding goods at ports have made the advantage less obvious. Some companies are resorting to air freight, which can cost millions of dollars in a single trip.

The balance between supply and demand is broken

"A box is hard to get", behind the soaring freight prices, reflect what changes in international trade? What are the underlying reasons?

See demand -

In the first 10 months of this year, China's imports and exports totaled 31.67 trillion yuan, up 22.2 percent year-on-year and 23.4 percent from the same period in 2019, according to the General Administration of Customs. Of this, exports were 17.49 trillion yuan, up 22.5 percent year-on-year and 25 percent over the same period in 2019. Due to the good containment of the epidemic in China and other Asian countries and abundant production capacity, many foreign trade orders have been transferred to China, and China's export has grown rapidly. There is a "pendulum shipping" phenomenon, that is, full containers go to Europe and the United States, while empty containers go to Asia. At the same time, the pandemic rebound in some countries has sharply reduced the number of port workers and truck drivers, leaving many ports unable to keep up with capacity, resulting in backlogs and shortages of containers.

Look from the whole world, container transport restores difference is bigger. Jia Dashan said that the port of Los Angeles, The Port of Long Beach and the port of New York and New Jersey saw their container throughput increase by 15%, 25% and 19% respectively in the first three quarters compared with 2019, significantly faster than the world average, which is a major reason for the severe congestion at US ports. Major European ports are recovering relatively slowly. Compared with the first three quarters of 2019, the container throughput of the ports of Rotterdam, Hamburg and Antwerp increased by 2.7%, -7% and 2.6% respectively, significantly lower than the world average.

The supply -

More than 96 per cent of the world's dry cargo containers and 100 per cent of its temperature-controlled containers are made in China, according to Drury Shipping Consultancy. Industry insiders point out that although China is the world's leading container producer, the number of enterprises engaged in container production is still small, and the epidemic has disrupted the pace of container production.

In addition to production itself, congestion at ports is also causing demand for containers to outstrip supply. According to the data released by Shanghai Airlines Stock Exchange, in October this year, Los Angeles and Long Beach are closed for 11.3 days and 10.6 days respectively. European ports such as Rotterdam, Antwerp and Hamburg are generally closed for more than 2 days. China's Shanghai and Shenzhen ports are closed for 2-3 days.

Affected by the epidemic, the efficiency of dock operation, shift change of seafarers, shift change of dock workers, relevant inspection and quarantine, collection and distribution and other related links has decreased, breaking the original balance between supply and demand. "Ships cannot be loaded in time at the loading port and containers cannot be unloaded in time at the unloading port, and the overall effective container transport capacity is impaired, resulting in a shortage of ship capacity." Zhang Shouguo, executive vice president of China Shipowner's Association, analyzed this reporter.

In the opinion of Wang Shiqing, general manager of Ningbo Huanyu Port International Freight Forwarding Co., LTD., the global port congestion and lack of manpower are only part of the factors, but the most important factors are the sharp increase in the purchase volume of Europe and the United States and the limitation of the port's own operation capacity. European and American ports are congested due to the large number of arriving ships and the limited operating capacity of ports themselves. In Asia, Korea and Japan have also extended the turnaround time due to relatively large export volume and restrictions on transit ports.

Encourage long-term contracts

China's container exports grew 241.3 percent year-on-year in the first three quarters of this year, customs data showed. Enter 4 quarters, can container supply keep up?

The China Container Industry Association (CTA) said that as Chinese container manufacturers step up production and liner companies speed up the return of empty containers, the monthly capacity has risen to a record high of 500,000 teU from 200,000 teU in the past. According to major liner companies, the shortage of empty containers has been basically alleviated. The inventory of new containers in China's major container manufacturers has exceeded 400,000 TEUS, and the supply of new containers is fully guaranteed.

From January to August this year, the shipping capacity of major liner companies in mainland China began to increase significantly, with the north American shipping capacity reaching 911 million TEUs, up 40.2% and 24.8% compared with the same period in 2020 and 2019 respectively. Capacity on the northwest European route was 5.67 million TEU, up 23.7 percent and 8 percent from the same period in 2020 and 2019 respectively. At the same time, shipping companies have taken measures such as changing bulk carriers to container ships, transferring vessels from other routes to China routes, and building new vessels, which have effectively alleviated the shortage of containers.

However, industry insiders point out that as there are still many backlogs of domestic orders and container ship loading rate is still high, it is difficult to lower the freight rate in the short term.

Relevant experts suggest strengthening long-term cooperation of supply chain transportation between ship and cargo. Long-term contract customers are the bulk of container transportation. Many overseas shippers will sign long-term contracts to secure transportation services at stable prices. Mr Zhang takes as an example: "At the beginning of this year, a Chinese company signed a long-term contract with a shipping group at a price of about $2,600 per container, but now the price per container has reached tens of thousands of dollars. Therefore, we encourage owners and shipping companies to enter into long-term contracts, which will not only protect the interests of both parties but also stabilize market prices."

Various parties are working together to strengthen the international supply chain logistics system. Zhang said the international supply chain system includes shipping companies, ports, yards, warehouses, trailers, trains, traders, agents and shippers. Supply chain disruptions, delayed ship transport capacity and acute supply-demand contradictions are mainly due to the increase in cargo volume, inadequate infrastructure in overseas ports and rear gathering and distribution systems, combined with labor shortages. All stakeholders in the supply chain should strengthen cooperation, strengthen the connection between each node of the supply chain, and jointly build a high-quality international supply chain service system.

In addition, Zhang Shouguo suggested, according to different risk levels and port entry crew capacity of the crew shift on board the implementation of fine, dynamic management.

"Given the current high freight rates, more shippers are inclined to enter into long-term agreements to lock in freight rates, and the proportion of long-term agreements in the market is gradually increasing, which helps stabilize the supply chain." Jia Dashan said.