Ports are under pressure, freight rates are skyrocketing, and companies complain!

As long as COSCO SHIPPING Holdings is going up, Henglin will never make its mark." Recently, an investor in the stock market said so, and the "seesaw effect of COSCO SHIPPING Holdings (601919) and Henglin Stock (603661) share prices? "Or due to skyrocketing shipping prices.

The China Export Container Freight Composite Index CCFI released by the Shanghai Shipping Exchange has continued to rise since the second half of last year, and has repeatedly hit record highs since the beginning of this year. In August, CCFI broke through the 3000 mark, reported 3006.82 points on August 6th, and dropped slightly to 2978.47 points on August 13th.

In the nearly one year in which shipping prices have continued to rise, COSCO SHIPPING Holdings currently hits a maximum of 33.40 yuan this year, which is a 7-fold increase from the lowest price of 3.14 yuan in May last year.

Unlike shipping concept stocks such as COSCO Shipping Holdings, import and export furniture companies represented by Henglin and Yongyi (603600) experienced pressure on the consumer side, transfer of overseas orders, and rising shipping prices during the epidemic. The stock price has gone out of rollercoaster-like ups and downs.

On August 19, CCTV Finance reported that due to the rebound of the epidemic, port congestion in many places has once again intensified. The current repeated epidemics may cause the global shipping system to face the biggest crisis in 65 years.
Times Finance called Henglin, Yongyi, Mengbaihe and many other listed companies in exporting furniture and household products to inquire about the impact of rising shipping prices on their export business. All companies said that due to poor shipping, a certain amount of inventory was overstocked.

"The goods sold to customer A cannot be sold to customer B. They have to be placed in the warehouse, which increases the inventory." The staff of the securities department of Yongyi shares said that due to the shortage of containers, the export speed of export products was two weeks slower than last year. Around.

Orders returned due to the epidemic, but the sea freight was blocked and the inventory piled up

The new crown epidemic and the anti-epidemic blockade have enabled many companies and employees to start their home office life. According to the data of the Prospective Industry Research Institute, in 2020, the penetration rate of China's remote office population is only 1%, while that of the United States is around 18%. The remote office market is owned overseas. Broad market.

Due to the increase in demand for home office, from the second half of last year to the first quarter of this year, the demand for overseas functional office chairs increased. The export of spring mattresses was higher than the level before the epidemic. The metal frame sofa categories such as functional sofas increased significantly, and the main furniture categories continued to promote the export value. Rise.

According to the latest data released by the General Administration of Customs on August 7, the export value of furniture and its parts in my country from January to July 2021 was 265.17 billion yuan (RMB, the same below); the total export value from January to July 2020 was 195.71 billion yuan. Total exports from January to July this year increased by 35.5% over the same period last year.

This increase looks good, but a closer look at this year’s monthly data reveals that the growth rate of furniture exports is slowing down.

From January to June 2021, the cumulative export value of my country's furniture and parts was 226.4 billion yuan, an increase of 44.5% over the same period in 2020 (year-on-year). In June 2021, the export value of furniture and parts was 39.85 billion yuan, and the export of furniture and parts in June increased by 14% compared with June 2020.

In July 2021, my country's furniture and parts exports were 38.78 billion yuan. In July 2020, my country's furniture and parts exports were 39.21 billion yuan, a year-on-year decrease of 1% in July this year and a month-on-month decrease of 2.67%. This means that there was a "double decline" in exports of furniture and its parts in July.

"Mainly due to the periodic effects of repeated epidemics, coupled with the shortage of shipping capacity, and the decline in operating efficiency of foreign ports, resulting in high demand and insufficient transportation resources." On August 18, Ding Ding, an observer in the household appliances field and founder of Nail Technology The major general analyzed the reporter.

Major General Ding further pointed out that the hindrance of logistics and transportation will bring about three major impacts. First, the increase in logistics costs will eventually lead to an increase in furniture prices, which will inhibit demand to a certain extent; second, the suppression of the demand side will be transmitted to the supply side. Related production and export enterprises need to adjust their production capacity and development pace in a timely manner; third, the suppression of exports will also increase the operating pressure of enterprises.

In fact, the impact of blocked shipping on the furniture industry appeared in the first quarter.

Henglin is one of the largest office chair manufacturers and exporters in China, and has established long-term and stable cooperative relations with IKEA and NITOR. According to the "Record of Investor Relations Activities on July 6-8, 2021" disclosed on July 14, some investors asked why the company's inventory in the first quarter increased significantly year-on-year.

At that time, the secretary of the Board of Directors of Henglin Co., Ltd. replied that the main reason for the increase in the company's inventory in the first quarter was that with the domestic epidemic under control, the demand for overseas orders increased, and the demand for China's export container transportation market continued to be high. At the same time, the shortage of space and the shortage of empty containers caused the company. It is difficult for customers to book space by sea, resulting in slow delivery of the company's goods.

On August 16, the reporter called the Investor Relations Department of Henglin Co., Ltd. as an investor, and asked about the impact of the recent increase in shipping prices and the shortage of containers. There is also some backlog in inventory.” At the same time, the staff emphasized that “the freight is borne by overseas customers.” It is reported that the company and most of its customers are settled according to FOB prices. The company is responsible for the subsequent shipping costs and other expenses are borne by the customer.

Coincidentally, Yongyi, a leading domestic seat manufacturer, also responded to the inventory backlog in the investor interactive platform on July 27. The company replied that “the company’s export products are currently affected by the tight shipping space, and there is a temporary inventory backlog. The company actively communicates with customers and shipping companies to strive for more space. At the same time, it adjusts production scheduling according to customer space resources and strives to reduce inventory."

On August 17, the reporter consulted the staff of Yongyi's Securities Department about the specific situation of inventory squeeze as an investor. The staff introduced, "The shipping process is for overseas customers to determine the freight company, and we go to the designated ship to enter the warehouse. Because the shipping space is relatively tight, some of the goods that have been determined cannot be transported, and there will be a backlog of about one or two weeks."

The staff member further stated, “The products for export are produced according to order, so each labeled product is stored separately, waiting for the corresponding ship to arrive at the shore. Because after the production of the product is completed, the packaging box is printed with the specific name, number, Hang tags, etc., so the goods sold to customer A cannot be sold to customer B. They can only be stored in the warehouse, which increases the inventory. It is probably equivalent to saying that the shipment speed is slower than the previous two weeks."

Can furniture exports maintain the peak season in the future? Major General Ding pointed out to reporters that several factors need to be observed. One is the control of the epidemic in Southeast Asia and whether the global furniture production capacity can be effectively recovered; the second is whether the constraints of logistics and transportation can be alleviated to a certain extent; the third is the recovery of the global economy.

The global shipping system is facing its biggest crisis in 65 years

"Some foreign trade companies report that due to the shortage of containers, the uncertainty of the export of goods has increased, the goods have been backlogged for several months, and the financial pressure is very large. Other companies have reported that they have not dared to accept orders due to the long freight cycle." Ministry of Commerce International Trade and Economics Tianyuan, an associate researcher of the Cooperative Research Institute, told the media recently that the continued increase in shipping prices has had a greater impact on export companies.

According to the latest news, such an impact may continue for some time.

In early August, data from the data provider Freightos showed that shipping a 40-foot container from China to the west coast of the United States had soared to $15,800.

The global container freight index on August 10 showed that the shipping price from China, Southeast Asia to the east coast of North America exceeded US$20,000 per TEU for the first time, which was 10 times the pre-epidemic level and increased by half from the previous month.

This wave of rise is mainly due to the prevalence of Delta mutant strains, which has led to global port congestion.
According to a report from the Financial Times on August 18, 353 container ships are lining up outside ports around the world, more than double the number in the same period last year.

According to media reports, according to officials monitoring the maritime traffic in San Pedro Bay in the United States, as of the evening of August 15, 37 ships were parked outside the two ports of Los Angeles and Long Beach, California, waiting for berths. This number is almost twice as high as in mid-July, and it is also the highest since the record of 40 ships in early February.

The prevalence of delta mutant strains has caused countries to strengthen border control, and traditional supply chains have been affected. The demand for production and life in various regions has increased significantly, resulting in a surge in maritime freight volume and ports overwhelming.
Taking Ningbo Zhoushan Port as an example, the production data of Ningbo Zhoushan Port Group on August 18 showed that the port's container throughput was 93,000 TEUs on August 17, and the average daily throughput dropped from the 11th to the 17th in the previous July. About 90% of the average daily throughput.

According to the "Financial Times" quoted by CCTV Finance on August 18, in addition to the epidemic, the obsolescence of global port infrastructure is also an important reason for the congestion of freighters. Toft, the chief executive of MSC, the world's second largest container freight group, said that in recent years, global ports have faced problems such as outdated infrastructure, limited throughput, and inability to cope with ever-larger ships. According to CCTV Finance, global ports are facing the biggest crisis in 65 years.

Regarding this "largest crisis in 65 years," Bai Ming, deputy director of the Marketing Research Institute of the Ministry of Commerce, pointed out in an interview with Times Finance on August 19 that "the shipping recession has been going on for many years, so the global shipping system has The investment in transportation, facilities, etc. has decreased, and shipping companies and logistics companies are controlling their transportation capacity. Once the transportation demand comes up, it cannot be guaranteed."

"The space inside the ship is small and the air is not clear, so it is easy to cause infection and increase the danger to the crew. At the moment of the epidemic, many people are unwilling to board the ship, and it is difficult to recruit new crew members." Bai Ming also said that for many years, crew members have been dispatched. One of the countries with the most is India. The epidemic in India has largely affected the number of crew members worldwide.

According to Red Star News, there are 1.6 million sailors in the world, of which 240,000 are from India. India is a veritable seafarer country.

Regarding how to alleviate the dilemma of "a container is hard to find", Bai Ming suggested that we should continue to increase the input of new containers and make full use of the existing container warehousing. "There are some containers piled up in overseas ports. , Through cost accounting, even if it’s empty, it can be pulled back."

On August 17, "Securities Times" reported that a staff member of an international freight company checked the air and sea freight prices from Shanghai Port to New York Port and found that the price in kilograms was relatively close. Roughly estimated, the air freight price is 4.2 USD/kg, and the sea freight price is 3.9 USD/kg.
In this regard, does it mean that seaborne goods may be transported by air? Bai Ming said that part of it can be replaced, but it cannot be completely replaced. "After all, the capacity of air transportation is not as good as that of ocean transportation, and the price is high. Some goods such as chips and household electrical appliances may be able to board the plane, but low-value products such as cement cannot."