Is The Turning Point Of The Market For The United States, The European Union And The United States To Deal With The "Stubborn Disease" Of Shipping?

The third quarter of each year is the peak season for shipping. In order to cope with the shopping season of Thanksgiving, Christmas and new year, European and American buyers usually prepare goods early.

Yiwu Small Commodity City in Zhejiang Province, the distribution center of Christmas commodities for Europe and the United States, will enter the peak period of export from August in the past, and Christmas orders from European and American countries are pouring in. But this year, it's been a lot colder. "The sales volume of stores this year is very poor," Zhao qinlei, owner of qinlei festival arts and crafts in Yiwu Commodity City, told the 21st century economic report that although the epidemic situation was more serious last year, last year's sales volume was better than this year, "because last year's shipping cost was not so high.".

Many small and medium-sized businesses in Yiwu small commodity market have fed back the same information. They report to the 21st century economic reporter that the value of a full box of Christmas items is far less than the freight, resulting in a sharp reduction in the purchase volume of European and American businesses. There are also some large and medium-sized manufacturers whose orders have not been affected, whining that there is no cargo hold to ship the goods, and that the goods cannot be shipped on time.

The main factor causing the shippers' dilemma is the soaring shipping prices. According to the latest world container freight index (WCI) released by Drury shipping consulting company on September 9, WCI is up 1% from last week, reaching a new high of US $10083.84/feu. Spot freight from Shanghai to Rotterdam rose 2% in a week to $14287 / feu. It is worth noting that the freight rate of the route has increased by 564% in just one year.

Crazy freight rates have aroused great concern of governments around the world. Last week, the three major maritime regulatory agencies of China, the United States and Europe held a "global shipping regulatory summit" to seek countermeasures. Is this a signal to the market of turning point?

This year, the shipping price of the US line has increased by nearly four times, and that of the European line has increased by about three times. The price of individual routes has increased even more- Visual China

Small cargo owners: lack of containers can not afford to transport

Since the end of last year, the 21st century economic reporter has been paying close attention to the import and export problems caused by the price fluctuation in the shipping market. The reporter learned from some international freight forwarders that the sea freight price of the US line has increased nearly four times this year, and that of the European line has increased by about three times. The prices of individual routes have risen even more.

According to Drury's September 9 data, WCI rose for 21 consecutive weeks, rising $97 last week to $10083.84/feu, up 309% from the same week in 2020. Freight from Rotterdam to New York soared by $384, or 7%, to $6160 / feu last week. Spot freight from Shanghai to Rotterdam rose $213 to $14287 / feu. Similarly, freight charges from Shanghai to Genoa, Shanghai to Los Angeles, Los Angeles to Shanghai, Shanghai to New York and New York to Rotterdam all increased by 1%. Drury expects rates to rise further in the coming week. On September 10, the Shanghai Shipping Exchange released a composite freight index for Shanghai export containers at 4568.16 points, up 1.4% from last week.

He Ping, a staff member of Shanghai Youlan international freight forwarding company, explained to reporters that some port facilities and unloading capacity in the United States and Europe were originally underdeveloped, lack of management and low unloading efficiency. Once the demand for unloading goods is strong, the goods will be pressed when they arrive at the port. "The cost of berthing at the port is much higher now," said Zhang Mou, the customer manager of Qibang international freight forwarder. Previously, the goods stayed in the port for about 3-5 days, but now they may stay for more than 10 days. "Every extra day of berthing has a day's cost, and these additional fees lead to increased costs.".

The biggest impact of high sea freight prices is the downstream businesses, especially for those with small profit margins. The staff of China Toy Import and Export Co., Ltd. told reporters, "for some Chinese manufacturers, the price of a box of goods may not be as high as that of shipping."

Several Yiwu stores, which are engaged in the export business of Christmas handicrafts, reported to the 21st century economic report that the export sales volume of Christmas crafts this year is on the decline compared with that before the epidemic. Qiu Xuemei, the owner of weijiule's Christmas craft, said that August, September and October are the peak seasons of sales in normal years, but orders have dropped a lot since August this year. "Due to the early end of the peak season, it is estimated that the annual sales volume will not reach the sales level of the previous year," Qiu Xuemei said.

"The sales volume of this year's shops is worse than that of last year, because the cost of shipping last year was not so high." Zhao qinlei, owner of qinlei Festival crafts, told the 21st century economic report that due to the epidemic situation, the cost of shipping was about four times higher than that of last year, so the profit space of commodities was greatly compressed. Many foreign customers can not see considerable profits, so they will no longer order from China, and the orders have decreased a lot. "Now it can be said that is barely survive." Zhao qinlei said with a bitter smile.

Qiu Xuemei also felt the impact of the surge in shipping. She thinks that the recent rising shipping prices have made many customers choose to order ahead of time, which is one of the reasons why her store's order season ended earlier this year.

The feeling of toy enterprises with large operation scale on the current market is quite different from that of Yiwu stores. Their orders are no less than before, but the trouble is that they can't be shipped out. "The overall export sales volume has not been greatly affected, because the epidemic situation in Southeast Asia is relatively serious, and many Southeast Asian orders have also been transferred to China." Lin Jun, a staff member of Zhejiang jinertai Toys Co., Ltd., told reporters that although the export sales volume is stable, the common problem this year is that there is no cabinet, that is to say, containers for transporting goods. Affected by the epidemic situation, shipping routes are congested, coupled with strong freight demand, resulting in slow container turnover efficiency. For them, the biggest problem is that the goods can't be transported out.

Zhejiang Jiajia baby carriage Co., Ltd. and Shanghai ha ha toy factory also have the problem of lack of boxes and cabinets. Ha ha toy factory is a robot metal toy enterprise. A staff member of the company, who did not want to be named, told the reporter, "our commodity production process is complex and has collection value. The main consumer group is adults, and the export volume is not much.". Due to the valuable nature of the product, it can still ensure a certain profit margin in the face of the impact of shipping costs.

The staff also told the 21st century economic reporter that the overall profit will decline this year, but the range is not large, about 5%. On the one hand, due to the rise of raw materials and labor costs, the prices of steel, packaging cartons and other raw materials increased, and the labor costs also increased due to the increase of the minimum wage standard in Shanghai. The other is the cost of shipping. However, the shipping cost that the company needs to bear is not high. Most of the shipping costs are borne by foreign customers, and the enterprise itself only needs to bear about 5% - 10%. These rising costs will eventually be paid by consumers in the form of higher commodity prices.

What they are most worried about is that the orders can not be delivered as scheduled, which will eventually affect the normal supply chain system.

Will the turning point of supervision come?

Yiwu small businesses are the epitome of tens of thousands of small and medium-sized cargo owners in the current trade ocean. Initiated by the European Commission last week, China's Ministry of transportation and the Federal Maritime Commission of the United States jointly held the "global shipping regulatory summit". "The performance of shipping companies in meeting the historical needs of their services, as well as the exceptionally high freight rates of shipping containers, have attracted the attention of regulators, legislators and the public around the world," said Daniel Maffei, chairman of the Federal Maritime Commission of the United States. The global regulatory summit provides an opportunity for the major competition authorities responsible for regulating the container shipping industry, Let them share the information observed in the market by their respective regulatory and enforcement systems, and compare the conclusions about the behavior of shipping companies.

It is reported that the topics of the summit include the development of international shipping since the outbreak of the new crown outbreak, including supply and demand analysis, supply chain bottlenecks related to shipping and the causes of service interruption; The countermeasures and results of the relevant jurisdictions and authorities in response to the above situations; What measures can be taken in the future to make the shipping industry back on track.

Just after the summit, the Federal Maritime Commission of the United States immediately established a national shipper Advisory Committee, including 24 importers and exporters such as Amazon, Wal Mart and IKEA, to discuss the U.S. container transportation problem and give solutions. It is understood that the committee's goal is to provide advice to FMC on "competitiveness, reliability, integrity and fairness of international maritime transport systems". Daniel B. Maffei, chairman of the FMC, said members needed to quickly understand the views of importers and exporters in dealing with the reality of daily shipping.

Or concerned about the increasingly stringent price control intention of regulatory agencies in various countries, some shipping companies have taken the initiative to suspend the price increase in peak season. On September 9, Dafei took the lead in deciding to stop all spot fare increases. The measure will take effect immediately from September 9 until February 1, 2022.

Dafei said that since 2021, due to port congestion, the serious imbalance between demand and the effective shipping capacity of sea containers, spot freight rates for container transport have continued to rise. Although market driven freight rates are expected to continue to rise in the next few months, in the face of unprecedented shipping industry situation, Dafei wants to put the long-term relationship with its customers at the first place. The group has decided to stop the spot rate increase of its brands (CMA CGM, CNC, containerships, Mercosul, anl, APL). The next day, Herbert followed Dafei and announced that there would be no increase in spot rates.

This is the third and fifth largest shipping company in terms of transport capacity. Their statements seem to serve as a weathervane. Many shippers and freight forwarders expect other shipping companies to follow suit and stop price increases. There are also some pessimistic freight forwarders who accuse that under the control of the fear of crazy rise in the early stage, many freight forwarders and shipowners have already ordered the containers for the fourth quarter. Most of these shipping giants have been robbed of their shipping space. Whether the price rises or not has no impact on their performance, so they have made such a "lip service performance".

Wang Nuo, a professor at Dalian Maritime University, believes that the role of the three regulatory agencies is limited. The shipping market has its own invisible hand to regulate and control, and it is difficult to fluctuate with the will of the government. Wang Nuo thinks that this round of freight soaring is due to the aggravation of imbalance between demand and supply, and it is difficult to be bound by rules. He can only rely on internal regulation and control of supply and demand. He pointed out that the shipping market always has a round of periodic fluctuations of ups and downs every ten years.

For the small and medium-sized shippers whose interests are damaged, Wang Nuo suggested that the state should draw the profits from COSCO Shipping Group to establish a freight subsidy fund to feed the small and medium-sized shippers suffering from high freight. In this way, COSCO's profits can be returned to its customers, and the market effect can be formed, or the freight rates of other shipowners can be suppressed to a certain extent.