“It’s really out of control now.” On the other end of the phone, Zhou Ming, the person in charge of a foreign trade company in Tianjin, sounded worried. Facing the strong demand for overseas orders, in order to ensure export shipping capacity, Zhou Ming just visited a circle of shipping companies, but still could not get more shipping spaces. He could only ask for help from freight forwarding companies at a high price. In late June, the 40 shipments from Tianjin to the Eastern United States The price of a square foot container will rise to 17,000-18,000 yuan. “Some freight forwarders even quoted prices higher than US$20,000,” Zhou Ming sighed to reporters.
“The freight is now more than 60% of the value of our goods. If we add a 25% tariff, there will be almost no profit at all.” Zhou Ming said that goods have begun to be available on the market. Companies with relatively low value have no choice but to abandon the contract when faced with shipping costs that are higher than the value of the goods.
What’s worse is that there are rumors in the market that starting from July 1, shipping companies will add another round of surcharges. Before that, on June 1 and June On the 15th, the shipping company had already added two rounds of surcharges, some of which were nearly US$5,000 more than in May.
Spurred by the strong increase in freight rates, shipping stocks in Hong Kong and A-share markets rose across the board on June 10. As of the close, leading company COSCO Shipping Holdings (01919.HK) rose 11.63%, the stock closed at the daily limit in the A-share market.
Foreign shipping companies give priority to allocating space to foreign companies
Zhou Mingzeng In an interview with 21st Century Business Herald on May 24, he said that at that time, the price of a 40TEU container from Tianjin to the East United States in May was US$13,000. Before the epidemic, the freight price of a container of the same specification on the same route was less than US$3,000. .
Unexpectedly, freight prices became even crazier in June. According to Zhou Ming, the company has experienced a large increase in orders from North America. He has just visited shipping companies, hoping to get more shipping spaces. After all, the prices offered by shipping companies are slightly lower than the market. But the result was not ideal, and he only got one cabin in the end.
On the one hand, prices have skyrocketed. In the first half of June, the cost of a 40TEU container from Tianjin to the East United States was US$14,000-16,000, while in the second half of June it rose to US$1.7 10,000-18,000 US dollars.
On the other hand, shipping companies are also short of space. Due to the surge in demand in the entire market, shipping companies are also selecting passengers and providing cabins according to VIP levels. Zhou Ming revealed that several foreign shipping companies have expressed helplessness to him. Even for companies such as CMA CGM, which he has long-term cooperation with, the space allocation is taken to the group level, and the Chinese branch can no longer choose customers. According to CMA CGM staff, the group issues priority customer lists to shipping companies, with multiple levels from VVVIP to VIP. Usually those at the top are enterprises from the country where the shipping company is located and large multinational companies. Chinese enterprises like Zhou Ming’s company are relatively low in the ranking and can hardly be allocated shipping space.
According to Zhou Ming, this kind of customer selection is currently prevalent among foreign-funded shipping companies. For example, the company’s long-term cooperation partner, the Japanese shipowner ONE, gives priority to limited shipping spaces to Japanese companies. With other large multinational companies, it is difficult to obtain one and a half cabins even if they have cooperated for many years. Sometimes there is a shortage of space for containers, and a large number of shipping companies’ containers are backlogged in American and European ports.
Zhou Ming had no choice but to go to the Chinese shipping company. Although COSCO Shipping was willing to help, there was not enough space. In the end, Zhou Ming could only cast a wide net for help from freight forwarding companies and bite the bullet and accept the market freight rate. According to Zhou Ming’s calculations, the current freight rate is already 60% of the value of the goods. If the 25% tariff imposed by the US government and other charges from port to door are included, there is almost no profit left. Unless the relevant costs are passed on to American consumers, this will undoubtedly cause the retail price of the product to continue to rise.
Picture/21st Century Economic Report
Freight rates increased sharply
On June 7, the Ningbo Shipping Exchange announced that the 5.29-6.4 Export Container Freight Index (NCFI) closed at 3091.6 points, an increase from last week 0.6%.
According to the Ningbo Shipping Exchange, space on European and continental routes is still very tight, and it is difficult to find a cabin on some voyages. The overall booking price in the market continues to rise slightly. The freight index for the European route was 4715.9 points, up 2.1% from last week; the freight index for the Mediterranean east route was 3609.3 points, up 1.2% from last week; the freight index for the west Mediterranean route was 4603.5 points, up 1.2% from last week.
The shipping demand in the North American route market remains strong, and the routes are basically full. The supply of space on Middle East routes is relatively tight, with the index at 2867.6 points, an increase of 0.2% from last week.
On the 4th, China’s export container freight comprehensive index released by the Shanghai Shipping Exchange was 2373.77, an increase of 77.41 from the previous week. The Shanghai Comprehensive Export Container Freight Index (SCFI Index) was 3617.07, an increase of 117.31 from last week.
Why have shipping prices increased so fiercely recently? According to analysis by Ningbo Shipping Exchange, the congestion situation at the Port of Oakland in the United States is severe. Peak shipping season is approaching and congestion of container ships anchored off the California coast remains, with Oakland surpassing Los Angeles/Long Beach as the epicenter of congestion. Delays at California ports have had a severe impact on liner schedules, with port congestion equating to sailing cancellations as ships are unable to return to Asia in time for loading, effectively reducing the effectiveness of trans-Pacific routes.The power is greatly reduced.
At the same time, the growth rate of container throughput at my country’s eight major hub ports has slowed down. In late May, the container throughput of the eight major hub ports increased by 4% year-on-year. Among them, foreign trade increased by 3.9% and domestic trade increased by 4.2% year-on-year. Looking at different ports, the growth rate of Tianjin Port and Ningbo-Zhoushan Port exceeded 20%, and the growth rate of Qingdao Port was nearly 20%. The production of confirmed cases in Yantian Port Area of Shenzhen Port has been temporarily affected, and epidemic prevention and control has been comprehensively strengthened. The demand for foreign trade at major coastal hub ports continues to be strong, and the shortage of export container space and empty containers has rebounded.
CITIC Construction Investment pointed out that the current SCFI index has increased by 285% year-on-year, and freight rates may continue to hit new highs in the future. With the existing supply chain extremely tight, freight rates may continue to maintain a high trend.
Marine shipping surcharges continue to increase
Abnormal market demand creates an abnormal freight rate system.
What annoys many freight forwarders and cargo owners is that shipping companies have repeatedly increased various surcharges.
Hapag-Lloyd recently announced that starting from June 15, it will increase the general rate increase surcharge (GRI) for eastbound routes from East Asia to the United States and Canada. For 20-foot containers, we charge USD 2,400 per box, and for 40-foot containers, we charge USD 3,000 per box.
This is the second time in recent days that Hapag-Lloyd has announced an increase in surcharges. Hapag-Lloyd announced in early May this year that starting from June 1, it would increase the comprehensive rate and surcharge for eastbound routes from East Asia to the United States and Canada. A 20-foot container will be charged US$960 per box, and a 40-foot container will be charged US$960 per box. Box charges $1,200.
GRI (General Rate Increa) refers to the comprehensive rate increase surcharge, which is generally used on South American routes and US routes. This fee is mainly due to the significant increase in shipping costs of shipping companies due to port, ship, fuel, cargo or other reasons, and the shipowner adds a surcharge to compensate for these increased expenses.
In addition, Hapag-Lloyd will also charge 25 per box for all inland transport to and from Bremerhaven, Hamburg and Wilhelmshaven due to traffic congestion at German seaports. Euro congestion surcharge.
CMA CGM will increase the GRI for routes from Asian ports to the United States and Canada starting from June 1, with a maximum increase of US$1,600 per box. MSC, the world’s second largest shipping company, has also raised the GRI and fuel surcharges on the Asia-U.S. route since June 1. The GRI has increased by up to US$1,266 per box, and the fuel surcharge has increased by up to US$412.
Wanhai Shipping also stated that due to the recent increase in operating costs, it will increase freight rates for goods exported from China to other parts of Asia. For 20-foot containers, the increase is USD 300; for 40-foot containers, the increase is USD 600; for high containers, the increase is USD 600.
It’s just that freight rates are already so high, and any higher freight rates may become an unbearable burden for small and medium-sized foreign trade companies. Zhou Ming told reporters that the company’s goods have relatively high value. For a large number of foreign trade goods with low value, how can they resist the fierce shipping costs? He heard that there were already small cargo owners in the market who had no choice but to give up their orders, even though the annual peak season was about to come. The market is spreading rumors that starting from July 1, there will be a new round of surcharge increases in shipping prices.
Is shipping cost an unsolvable dilemma?
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