Soaring 500% CHINA-US ocean freight over 20000 U.S. dollars!
Soaring 500% CHINA-US ocean freight over 20000 U.S. dollars! Delta variants spread aggravates “a container is hard to find”.
Container freight from China to the United States has hit a new high of more than US$20,000 per 40 feet.
On August 10, the Freightos Baltic Index (Freightos Baltic Index) launched by the Baltic Shipping Exchange and Freightos showed that while the freight index of other routes has hardly changed, China/Southeast Asia-North America West Coast and China/Southeast Asia-North America East Coast The sea freight price of China continues to soar, with the former price of US$18,555 per 40 feet and the latter price of US$20,636 per 40 feet.
A business person who has been engaged in import and export trade for a long time lamented to the CBN reporter that shipping prices have soared since the beginning of this year, and more expensive prices do not necessarily mean better results. The delay is still a delay.
In the first half of this year, the containers sent by China could not be recycled in time, causing the price of containers to soar. In the second half of the year, with the recovery of the global economy, freight rates continued to rise.
Huo Jianguo, vice chairman of the China World Trade Organization Research Association, said in an interview with a reporter from China Business News that now the shipping price from China to North America has risen to more than 20,000 US dollars, which is already a historical high.
This is mainly affected by the epidemic. Some shipping companies may encounter obstacles in terminal shutdowns. In addition, some countries’ shipping terminals also have problems. These factors have accelerated the compression of certain routes.
The surge in shipping prices is also related to the U.S. dollar, and the price of bulk commodities has also increased significantly some time ago. The fluctuation of the two factors, the U.S. dollar and the epidemic, will have a certain impact on freight rates.
How long will shipping prices continue to soar under the epidemic? Is there a way to crack it?
The spread of DELATA VARIANT aggravates shipping difficulties
The Global Container Freight Index shows that the shipping price of China/Southeast Asia-North America East Coast exceeds US$20,000, a year-on-year increase of more than 500%. The CBN reporter saw that on the 2nd, the shipping cost of this route was still around 16,000 US dollars. At present, the sea freight between China and Europe is fixed at nearly US$14,000.
Why have ocean freight prices soared again recently? There are signs that due to the delta mutant strain raging around the world, the epidemic has rebounded in many countries, which has led to a shortage of loading and unloading personnel in major foreign ports, which has generally slowed container turnaround time, and container recycling when the container clearing time has become longer. The rate is low, and the “hard to find a box” phenomenon is even more serious.
According to the latest data from the shipping consulting agency Sea-Intelligence, the time required for a container to be loaded and unloaded from the ship to the terminal train is 18 days in Seattle, two weeks in Oakland, and more than one week in the Port of Savannah.
Analysis shows that shipping delays have absorbed 25% of all trans-Pacific capacity, while demand has soared by 25% over the same period.
Sanne Manders, chief operating officer of Flexport, a freight forwarding company headquartered in San Francisco, said that the transit time from Shanghai to Chicago via Los Angeles/Long Beach Port (including cargo transit and ship voyage at the place of origin) has increased from 35 days. More than doubled to 73 days.
“This means that it takes 146 days for a container to cycle back to the origin for reloading, reducing the effective capacity of the container by 50%,” Mendes said.
Huo Jianguo said that the rapid increase in shipping prices is also related to the monopoly of shipping by some overseas companies. “We have a lot of ships, but our ships are leased to these companies, and they control the freight rate, and the freight rate is under relatively great pressure. Because the major shipping companies are basically in the hands of Europe and the United States, our control ability is limited. .”He says.
Zhou Shijian also reminded reporters that the epidemic directly affected seafarers. “Before, due to the outbreak of the epidemic in cruise ships and other aspects, many people would not come out as seamen if they could live a life.” He said.
It is worth pointing out that with the arrival of the shopping season, carriers will begin to charge port congestion charges and surge demand charges, while restricting multimodal transport bookings. For example, starting from mid-August, the container shipping company Hapag-Lloyd will impose a surcharge of US$5,000/FEU on trans-Pacific eastbound cargo, and other carriers will also charge similar fees.
The soaring container rate has in turn led to an increase in container ship charter fees, forcing shipping companies to give priority to providing services on the most profitable routes.
Maritime consulting company Alphaliner executive consultant Zhou (Tan Hua Joo) said: “Ships can only profit in industries with higher freight rates. This is the reason why shipping capacity is mainly transferred to the United States.”
Philip Damas, managing director of maritime consulting firm Drewry, also sees that some shippers have reduced traffic on less profitable routes, such as trans-Atlantic and intra-Asia routes.
“These factors have turned global container shipping into a highly chaotic, under-supply seller’s market in which shipping companies can charge four to ten times the normal price of freight.” He said that he has not been in the shipping industry for more than 30 years. Seeing this situation, it is expected that this “extreme rate” will continue until the Chinese New Year in 2022.
How extreme can the situation be?
Such a story: A shipping carrier told a company that it would cost $32,000 to ship a standard container from Shanghai to Los Angeles.
It is true that the quotation is an outlier-mainly for customers who require moving a large amount of backlog boxes at one time, but this example can also illustrate how desperate some shippers are now, and how the carriers are now How strong it is.
Consumer enthusiasm in North America is high, and capacity is difficult to improve
Data shows that North American consumers continued to maintain a “buy, buy, buy” model in the first half of 2021.
According to data from the US Bureau of Economic Analysis, by May 2021, consumer spending on durable goods on an annual basis will be 25% higher than in 2019.
Among the sub-indicators of the newly released second-quarter gross domestic product (GDP) data in the United States, personal consumption expenditure also contributed significantly, with personal consumption expenditure increasing by 11.8% in the current quarter.
The current consensus among executives in the shipping industry is that the problem of tight capacity will not be alleviated before February 2022.
Reight Right Global Logistics founder Robert Khachatryan believes that unless consumers do feel inflationary pressures or there are external events that cause the economy to slow down, the current situation will not be alleviated.
“In May, we were already shipping Christmas products. As long as there are vacancies, someone will try to ship their products to the United States.” Kazayan said. “They won’t wait until September.”
“This is not even a shipping issue, but an issue of infrastructure capacity,” he added. “Long before we entered the peak season, the capacity of the Port of Los Angeles was already overloaded and maintained at around 160%. Even if we increase the number of ships, there will be no problems. Will disappear. Therefore, real improvement can only be seen when demand drops by 60% to 70%.”
Prices are easy to go up and hard to go down, rising fast and falling slowly. Before the epidemic, the shipping price of this route was about 6000~7000 US dollars. Now it has risen to 15000 US dollars in the previous period, and now it has exceeded 20,000 US dollars to the level of 22,000 and 23,000 US dollars. This is indeed a bit outrageous. But this is determined by the relationship between supply and demand. There are many freight lists and there is a shortage of containers. “
The shortage of boxes is because we send out the goods, and the terminal operation at the destination may be slow. The shipping company was unable to bring the empty boxes back normally. Therefore, this is equivalent to an increase in the price of boxes and shipping.
A substantial price fall cannot be achieved in the short term, but there will be a process of gradual fall after stabilizing. Now that the epidemic is under great pressure, all companies and units are actually thinking of ways to increase profits through price increases, and they also want to take the opportunity to make a profit. “
Some analysts pointed out that even if consumer demand growth ends, inventories will remain at historical low levels. In other words, replenishment activities will continue to promote trans-Pacific trade.
The American Retail Federation predicts that imports from US ports in August will surge before the traditional peak season. Many industry observers have also seen that importers are placing orders early to avoid holiday product delays.
FreightWaves’ maritime market expert Henry Byers predicts that this will result in the longest ship waiting time since early February: 25 to 40 ships waited in line for 8 days, just for one berth.
Suke International Freight Forwarding Company urges customers to book with the carrier eight weeks before the scheduled departure, because more waiting time will be added every week.
The aforementioned personnel engaged in the import and export trade business told the CBN reporter that this requires very precise planning of the future container booking volume and precise communication with the factory. After the opening of the booking, the freight forwarder will stay up late to confirm with the American customer. The reservation situation, “is to fight for speed and character.”
A fact sheet on the website of a logistics provider indicates that retailers who need to put their products on the shelves before November 1 should ensure that they ship their products to the east coast destination before August 21 and ship them before September 3 Destinations in the western United States.
Kazayan also predicted that importers may start ordering earlier in the future. “So that’s why we don’t think there will be a slowdown next year, or maybe even not at all: next year they may place orders for Christmas in March.”
At present, shipping analysts generally expect that ocean freight rates will rise further in the next few weeks, and as trade growth exceeds the growth of the fleet, the supply of ships will not be much eased before the launch of new ships in 2023.
Jason Chiang, director of Ocean Shipping Consultants, a maritime consulting company, said frankly: “Every time you think (price) has reached an equilibrium, something happens to make the shipping company increase the price.”
He also said that the new capacity orders exist and are almost equivalent to 20% of the existing capacity, but these capacity will be online as soon as 2023, so there will not be any significant increase in supply within two years.
Is there a solution to the soaring shipping prices? Huo Jianguo told the CBN reporter that before the epidemic, the world’s freight volume and the number of containers were basically balanced. Even before the epidemic, orders for ships were declining, and the sales of boxes were also difficult, indicating that the demand was already saturated at that time. . “The epidemic has caused a sudden shortage of supply. The export orders for boxes may be good in the near future, but this is still unsustainable. Because the high price increase is a short-term factor, not a long-term factor, the price will calm down one day. If you go to shipbuilding now, wait three Years later, the ship will be built, and maybe the freight will come down, so we can’t do long-term emergency rescue now.” He said.
Now shipping price companies still have the possibility of bargaining. According to different routes, shipping companies must have a bargaining process. Because the price determination is actually a two-side factor, if everyone can put a little pressure on the shipping company, it may at least restrain the frenzied price increase.