Recently, the Baltic Dry Index (BDI) has been declining continuously since January 7, and as of January 21, it has fallen for eleven consecutive days.
In contrast, shipping rates are high and shipping space is tight. According to the latest data released by the Shanghai Shipping Exchange, on January 21, the China Export Container Freight Index (CCFI) hit a record high of 3,555.24 points.
“The last batch of goods before the Lunar New Year is about to be shipped. I originally thought that the price of Matson (Mason Steamship Co., Ltd.) would be reduced on February 9, but in reality there is no space available.” This was posted by an Amazon seller on the social platform. The condition also expresses the sentiments of many sellers.
CCFI hits record high again
The reporter inquired relevant data and showed that since the beginning of this year, the BDI has declined for 11 consecutive trading days from January 7 to January 21. The BDI was 2,289 points on January 7, and the BDI was 1,415 points on January 21. The decline reached 38.37% in just half a month, the lowest level since February 16, 2021. Among them, on January 11, January 12, January 13, and January 14, the daily decline exceeded 100 points.
“From the perspective of ship type, the decline in Capesize freight rates (BCI) is the direct cause of the decline in the BDI index.” Ming Ming, chief economist of CITIC Securities, said in an interview with reporters.
However, while BDI is declining, ocean route freight rates remain high. According to data released by the Shanghai Shipping Exchange, the CCFI representing the settlement price on January 14 was 3489.94 points, approaching the 3500 point mark, a sharp increase of 57.15 points or 1.66% compared to the previous period, which once became the highest point since the inception of the index. . The latest data on January 21 showed that CCFI broke through 3,500 points and reached 3,555.24 points, once again setting a new historical high.
The Shanghai Export Container Freight Index (SCFI), which represents spot prices, is also at a historically high level. On December 31 last year, SCFI reported 5,046.66 points, breaking through the 5,000-point mark for the first time. According to data released by the Shanghai Shipping Exchange on January 21, 2022, the SCFI was 5053.12 points.
Liu Xiangdong, deputy director of the Economic Research Department of the China Center for International Economic Exchanges, said in an interview with reporters that freight rates on ocean routes have remained high recently, mainly due to the repeated impact of the new coronavirus epidemic, which has caused port congestion and hindered the supply of European and North American routes. In particular, the shortage of manpower is quite prominent.
Consolidation shipping prices remain high
Regarding the differentiation between the downward trend of BDI and the upward trend of CCFI and SCFI, it is clearly stated that CCFI and SCFI are used to measure container shipping prices, while the BDI index measures dry bulk freight, so the trends of the two are not the same. At the same time, he further said that if you look at the China Import Dry Bulk Freight Index (CDFI), you can find that it has a similar trend to the BDI, and both have experienced sharp declines recently. The high level of container shipping prices means that overseas demand is not weak, and demand from developed economies such as Europe and the United States is stronger. This is also mutually confirmed by my country’s booming export performance in recent months.
China’s export container shipping market weekly report released by the Shanghai Shipping Exchange on January 22 also pointed out that on North American routes, the epidemic has overwhelmed the U.S. medical system, and the U.S. market’s demand for all types of cargo transportation, including epidemic prevention materials, continues to remain high. . The worsening of the epidemic and the inefficiency of the collection and distribution system have led to prominent contradictions such as port congestion, stagnant container pressure, and poor transportation turnover in the United States. Regarding European routes, a new round of epidemic caused by the Omicron strain has broken out on a large scale in Europe. Market demand for the transportation of various materials continues to remain high, route capacity remains stable, and port congestion continues. From January 15 to January 21, the average space utilization rate of ships in Shanghai Port was basically at the full load level.
Logistics and freight forwarding have more personal experience of the chain reactions such as high freight rates and tight shipping spaces. A staff member of an international logistics company told reporters, “It’s the end of the (lunar calendar) now, and everyone wants to take a holiday after shipping out the goods. There have been more shipments recently. However, current transportation capacity is tight, port congestion and other phenomena still exist.”
“Now there are no more slots for January 26th, only February 2nd.” A freight forwarder also said that shipping capacity has been tight recently. Regarding the reason, he said, “We are rushing to ship goods at the end of the (lunar calendar), and there are few ships. , prices are rising.”
Exports will remain high in the first half of the year
“The fall in dry bulk freight rates is a certain benefit to import companies, because their import cost pressure is expected to be alleviated. The high level of container shipping prices shows that the current external demand remains resilient, and export companies still face the challenges brought by high freight rates. Trade risks.” Mingming said.
At the same time, in Mingming’s view, it should be noted that since the epidemic, the volatility of freight rates for both container and dry bulk freight has increased significantly. Therefore, foreign trade companies need to establish a “risk neutral” awareness and sign long-term contracts and use them rationally. Derivative instruments address price risk.
Since last year, the consistently high shipping prices have affected the profits of many foreign trade companies. This year, some companies have already adopted countermeasures. A manufacturing export company said that freight is usually determined according to the trade terms in the contract, and can be borne by the buyer or borne by the seller. If the company bears it, the freight will be included in the amount of the goods based on the current freight price. At the same time, the company also signed agreements with some shipping companies this year to lock in some shipping spaces to cope with significant fluctuations in freight rates.
“For foreign trade enterprises,�, in the short term, we may face high freight rates and capacity supply problems, as well as higher logistics costs; for logistics and transportation companies, weakening demand may lead to excess supply of transportation capacity, but obstruction of port logistics may affect the high level of transportation capacity costs. Liu Xiangdong said that my country’s foreign trade exports will remain at a high level in the future, especially as the current epidemic is still raging around the world. Therefore, foreign trade companies must adapt to this situation, prepare early, carry out digital transformation, increase reserves, and improve order fulfillment. capabilities, while actively cooperating with logistics and transportation companies to reduce logistics and transportation costs and ensure the stability and security of the supply chain.
Mingming said that the entry into force of RCEP this year has brought opportunities and challenges to related industries. The increase in trade has brought profit growth to export companies. From the perspective of tariff cost reduction, the cost pressure on my country’s import companies is also expected to be released. The current global supply chain is still in the process of repair, and domestic cross-cyclical adjustment measures to stabilize foreign trade are gradually being introduced and actively implemented. It is expected that my country’s exports will still maintain a high boom in the first half of this year. Entering the second half of the year, as overseas economies gradually recover With tight monetary policy, external demand may gradually slow down, and coupled with the restoration of production capacity in Southeast Asia, my country’s export growth is also facing a certain risk of falling.
</p
