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When will the sea freight price increase stop? These giants "dance" with madness!

Echemi 2021-06-28

Leading companies have already planned to build their own logistics.

In mid-June, the headquarters of COSCO SHIPPING Group ushered in a visiting group from Shaanxi. Leading the team was Liang Gui, member of the Standing Committee of the Shaanxi Provincial Party Committee and Executive Vice Governor, and Li Zhenguo, president of Longji Co., Ltd., was among them.

The main content of the talks between the two parties included, "How to further expand Shaanxi's logistics channels to better serve local enterprises". On this basis, a substantial cooperation result was born-Longji and COSCO Shipping Lines signed a transportation service framework agreement.

When the price of silicon materials stirred up the domestic photovoltaic supply chain and caused many companies to complain, for leading photovoltaic companies with greater export demand, the soaring shipping price has become a supply chain cost factor that cannot be ignored.

A freight forwarder in Shanghai told reporters that the current export prices have risen across the board, and the shortage of containers is likely to continue until the end of this year.

Against this background, the reporter noticed that major domestic leading photovoltaic companies have recently reached strategic cooperation or meetings with COSCO Shipping to ensure the smooth export and delivery of their photovoltaic products.

When will shipping madness stop?
The latest export container freight index released by the Shanghai Shipping Exchange hit a record high again.

On June 18th, the Shanghai Export Container Index (SCFI) reported 3748.36 points in this issue, an increase of 44.43 points or 1.2% from last week; China Export Container Index (CCFI) reported 2526.65 points in this issue, an increase of 84.08 points compared with last week. 3.4%. It is worth noting that compared with last year's low, the two indexes have increased by more than 358% and 203% respectively.

The shipping pressure behind the numbers is obvious.

The reporter inquired about the international logistics online platform "Where to go" and found that, based on recent time, the freight rate of a 40-foot container from Shanghai to the port of Rotterdam in the Netherlands was US$12,800, and a "special price" was marked.

"Currently, shipping prices are extremely high, which has affected the profits of many foreign trade companies and prolonged the delivery cycle." An international logistics industry insider told reporters that the current prices of routes to Europe and the United States are very high. The 40-foot-tall container is already close to US$20,000, a year-on-year increase of nearly 10 times."

At present, it is hard to find a box in domestic ports. The reporter learned that sea traffic congestion has become the norm. Due to the surge in imported goods, overseas ports have encountered labor shortages and containers are piled up like mountains.

The aforementioned freight forwarders compared the current situation of domestic and foreign ports to the "two heavens of ice and fire", "Our country has relatively good control of the epidemic, with heavy traffic in major ports and high demand. However, the foreign epidemic is difficult to predict, and there are workers in some ports. Strikes, lack of labor, and many boxes are hard to come back after they go out."

The "empty container problem" has become the crux of the current shipping link. In a recent research report released by GF Securities, the supply factors for the surge in shipping prices after the epidemic were summarized into three points: the shortage of containers in exporting countries, the decline in port efficiency in importing countries, and the increase in labor costs. “China’s supply and demand side has gradually recovered since the second half of last year, but the European and American (commodity) demand side has less elasticity to the epidemic and recovered earlier than the supply side. In other words, since the second half of last year, European and American countries have formed a “order” for imports from China. Towards'path dependence, that is, the exporting country's container ships' will have no return'.” GF Securities analysts believe.

In fact, when the sea port congestion on the supply side cannot be alleviated as soon as possible, even if the demand side is strong, the lengthening of the shipment cycle will also cause the increase of the cost of foreign trade companies.

The aforementioned freight forwarder told reporters that under normal circumstances, the shipping cycle of an ocean-going route is one month, and now it is basically stretched to more than two months. “As the capacity is declining, domestic ports will also be congested.”

The reporter noted that domestic ports are also facing the risk of repeated epidemics in some areas. On May 21 this year, an employee in the Gangxi operation area in Yantian, Shenzhen was diagnosed with new coronary pneumonia. As one of the busiest container terminals in the world, Yantian Port's capacity has slowed down, casting a shadow over the global supply chain. According to the news announced by the "Shenzhen Release" on June 21, after the outbreak, the daily operating capacity of Yantian Port dropped to 30% of the normal operating capacity. Up to now, the number of berths in production in the Yantian Port Area is 9 with an average daily throughput of nearly 24,000 TEUs. The overall operating capacity has been restored to 70%. It is expected that the production level will basically resume at the end of June.

However, when will the madness of global shipping prices end? The answer given to reporters by many industry insiders is not certain.

The aforementioned freight forwarders believe that the current tense situation may continue until the end of this year. Another analyst in the logistics industry told reporters, “The epidemic has made society run less smoothly, which has a great impact on the global supply chain cycle. From now on, the spread of new mutant strains is stronger. If it can't keep up with the mutation speed of the virus, it will be choking."

Photovoltaic leader "emergency response"
On June 22, Trina Solar's official WeChat posted an article mentioning that it has joined hands with COSCO SHIPPING to upgrade maritime security to ensure the delivery of global photovoltaic projects.

Coincidentally, JinkoSolar recently announced the signing of a strategic cooperation agreement with COSCO SHIPPING, reaching an agreement on further broadening maritime logistics channels and improving communication mechanisms.

In addition to the signing of Longji in mid-June, the top three domestic photovoltaic modules have closely strengthened their cooperation and ties with COSCO SHIPPING.

In 2020, LONGi will surpass JinkoSolar to become the world's largest PV module shipment company. But in recent years in the competition for module market share, overseas markets have accounted for an important shipment share of major leading companies.

Statistics from the China Photovoltaic Industry Association show that in 2020, my country’s total exports of photovoltaic products will be approximately US$19.75 billion, a year-on-year decrease of 5%. Among them, the export volume of silicon wafers and solar cells decreased compared with the same period in 2019, while the export scale of modules still maintained rapid growth. In 2020, my country's module export volume was 16.99 billion U.S. dollars, and the export volume was about 78.8GW, an increase of 18% year-on-year .

Among the various regional markets for my country's overseas export of photovoltaic modules, the Netherlands, Vietnam, Japan, Brazil, Australia, Spain, India, Chile, Germany and other markets rank in the forefront. In this context, the growth rate of shipments of leading companies in overseas markets in 2020 will be more significant: LONGi's overseas market revenue last year was 21.641 billion yuan, a year-on-year increase of 70%; JinkoSolar's revenue last year, excluding the Chinese market, was 28.758 billion yuan. , A year-on-year increase of 36.60%; Trina Solar last year’s overseas revenue accounted for as much as 70.24%, and revenue increased by 28.43% year-on-year.

However, as shipping prices continue to rise, there are no shortage of popular shipping routes in the exporting countries. This means that with the increase in freight, the overall cost of overseas photovoltaics will increase.

At the performance briefing meeting held by Longi in the first quarter of this year, a set of component logistics price information was disclosed: the domestic freight for components was stable at an average of 3 cents/W, and the foreign freight in the fourth quarter of 2020 was 2.5 cents/W. With this calculation, LONGi’s total freight last year was about 2.5 billion yuan. Considering that the freight for domestic components shipped to the United States in the first quarter of this year has risen to 3.5 cents/W, the increase in the shipments of superimposed components will make the freight cost a big deal. The cost of expenditure.

In fact, while the production capacity of major domestic photovoltaic leading companies has increased and the scale of shipments has increased, the scale of inventory is also increasing. In the first quarter of this year, the inventory balances of Longi and Trina Solar were 15.181 billion yuan and 8.81 billion yuan, respectively. 100 million yuan, a substantial increase over the same period last year. When the inventory increases, the logistics and transportation expenses for the delivery of the finished products involved in the inventory will also increase.

The reporter found that in addition to strengthening cooperation with COSCO Shipping to ensure smooth export transportation, leading companies are already planning to build their own logistics to completely open up the transportation links of the supply chain.

In May of this year, Longji shares wholly-owned Hainan Longmao Logistics Co., Ltd., with a registered capital of 10 million yuan. According to the information provided by Qixinbao, the company’s legal representative is Zhong Baoshen, and its business scope includes: domestic freight forwarding, international freight forwarding, and land-based international freight forwarding; loading, unloading and handling; general cargo warehousing services, etc.

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