Plunged 21%! Is The Container's High Freight Rate or An Inflection Point Ushered in?

Last week, trans-Pacific container shipping costs fell by nearly a quarter, marking the biggest weekly drop in two years. The drop in shipping rates shows that the huge Western demand for Asian exports is slowing down, but shipping industry executives say that it will take months for ship congestion outside US ports to ease.

The decline in sea freight rates coincides with the end of the peak season for traditional container shipping; the peak season of each year usually starts in August, and Western importers begin to purchase goods to prepare for the holiday season at the end of the year. Now that most products are at least in transit, the space at the front end of the voyage is gradually opening up, which has led to a drop in shipping rates. However, this demand cooling has not yet eased the congestion in American ports. In large ports such as Los Angeles and Long Beach, California, there are still dozens of cargo ships waiting in line to unload. These cargo ships are loaded with various products, from Christmas trees and electronics. Products to heavy machinery. Executives in the shipping industry said they expect to wait until February next year at the earliest for shipping traffic to ease.

Since last year, global container freight rates have continued to rise, and the quotations in the container market on some routes have skyrocketed to more than ten times. Yiwu, Zhejiang, is an important center of my country's export of foreign trade commodities. The drastic changes in container freight rates also have a huge impact on Yiwu's export of commodities. Some commodities cannot bear the excessively high freight rates, and many overseas buyers have suspended their orders, and have postponed orders for some low-value commodities or refused to receive the goods.

In addition, due to the impact of the epidemic, many international customers are inconvenient to travel, and the passenger flow in the trade city is also much lower than before, resulting in a significant decline in the order volume of many stores this year. According to expert analysis, there is still a large backlog of orders in the country and the loading rate of container ships is still at a high level. Therefore, the freight rate is unlikely to fluctuate sharply in the short term. However, on the other hand, the margin of supply and demand of containers has eased, and in the future, we need to be alert to the risk of freight rate diving caused by the decline in loading rate.

According to the latest Global-Baltic Container Freight Index (FBX) on the 12th, the Asian to American West Freight Index has dropped from a high of US$20,586 per 40-foot container on September 10 to US$14,885 per 40-foot container. Compared with the previous period of November 5, 18730 US dollars, a decrease of 3,845 US dollars, a decrease of 20.5%, and a decrease of 5701 US dollars, a decrease of 27.69%, compared with the September 10 high.

The Asia-East US Freight Index has dropped from a high of US$22,173 per 40-foot container on September 10 to US$16,671 per 40-foot container. Compared with the previous period of November 5, 19,895, it fell by 3224 US dollars, a decrease of 16.2%, and compared with the September 10 high, it fell nearly 5,498 US dollars, a decrease of 24.79%.

Last week, Drewry's latest comprehensive world container index remained stable at US$9,192.50 per 40-foot container, but it was still 250% higher than the same period in 2020. The year-to-date WCI average composite index assessed by it is US$7,335 per 40-foot container, which is US$4714 higher than the five-year average of US$2621 per 40-foot container.

The Drewry Index shows that the Shanghai-Los Angeles spot rate rose 1% to US$9,947/FEU. However, the Shanghai-Genoa freight rate dropped by 2%, or USD 255, to USD 12,438 per 40-foot container. Shanghai-Rotterdam and Shanghai-New York freight rates are hovering at the levels of previous weeks. Drewry expects rates to remain stable in the coming week.

While the majority of freight forwarders are wary of the price diving, they also need to pay attention to the global congestion in the East and the West. This situation is expected to continue for a period of time. The trend of container freight rates needs to continue to be paid attention.....

The freight rate in Southeast Asia soared and broke through 2000

What's more surprising is that the Southeast Asia route, which has always been stable in freight rates, has also ushered in a big price increase in the near future, with an increase of as much as US$1,000/container. Wan Hai Shipping Company previously issued a notice: starting from November 6, 2020, the price of exports from Shenzhen to all ports in Southeast Asia will increase! +USD500/1000/1000. The freight rate broke through 2000$.

It is worth noting that under the background of tight transportation capacity, the industry has frequently experienced container shortages and dumped containers! At the same time, buyers will also have abandonment, so we need to be vigilant! Both Textainer and Triton, the world's top three container equipment leasing companies, have previously stated that there will continue to be a shortage of containers in the next few months.

The Truth Behind the Congestion of American Ports of the Century

The 25% increase in the volume of the Asia-North America route compared to 2019 is the first major cause of congestion in US ports: the volume of the Asia-North America route far exceeds the average growth rate and far exceeds the carrying capacity of the terminal.

The 15% increase in the shipping capacity of the Far East to North America route within half a year is the second important cause of port congestion. It is worth noting that the growth of the North American route's capacity mainly comes from small container ships, and the new entrants are mainly small shipping companies, shippers, freight forwarders, etc. Cross-border operators, and this may not be enough to support large-scale container transportation.

The rapid increase in container throughput at the terminals is the third cause of port congestion. The rapid increase in container throughput at the Los Angeles and Long Beach terminals has caused a large number of container ships to unload in a short period of time, and empty containers were not returned in time, occupying a large amount of yard space and frame. . A large number of empty containers are stranded at the US West Wharf, which intensifies port congestion, and at the same time, the occupation of trailers leads to insufficient truck capacity.

There is a serious labor shortage in the United States. Insufficient truck and rail capacity is the fourth cause of port congestion. The United States is severely short of labor, with insufficient truck and rail capacity, and limited inland warehouse space. Customers cannot pick up containers in time, resulting in a large number of heavy containers in the port.

Consolidation market crisis is difficult to solve! Expert: It will get worse before it gets better

Maersk, the world's largest container ship shipping company, predicts that the world's most severe supply chain shortage will continue until next year. Deutsche Bank analyst Andy Chu stated in a recent report that the profitability of the container shipping industry in 2021 is beyond imagination. Taking the world's largest container shipping company Maersk as an example, the company's third-quarter net profit reached 5.44 billion U.S. dollars, which is five percent of the same period in 2020. It is optimistic that the container shipping industry will continue to prosper in 2022. Maersk said that their strong financial performance is entirely attributable to the rapid growth in North America, Latin America, Europe and Asia, where the demand for ocean freight has soared by nearly 10%.

Benefiting from the impact of the surge in freight rates, the top seven listed shipping companies in the world, including Maersk, COSCO Shipping Lines, and Hapag-Lloyd, made a total profit of more than 23 billion U.S. dollars in the first half of this year, much higher than the same period in 2020. 1 billion dollars.

Maersk said that the situation in Port Said will continue. Due to the shortage of labor caused by the epidemic, the speed of ship unloading and loading has been greatly reduced, and the logistics speed has been slower. However, as the epidemic slows down, demand is still increasing. This situation in which demand is greater than supply, including when the situation in Port Port will slow down, has not yet seen any signs. They believe that this unique situation will continue at least until the end of the first quarter of next year. The global container shipping market crisis has not yet eased, and port congestion may continue until 2022. The performance of container shipping companies may be better next year.