Why Freight Fluctuation Can Solve "Box Sorrow"

  The shipping industry is an important guarantee for the development of international trade. The sudden outbreak of COVID-19 has brought an impact on the global shipping industry. With the gradual recovery of the economy and the recovery of shipping demand, container freight rates continue to rise, and the market environment continues to undergo profound changes.

In his congratulatory letter to the 2021 North Bund International Shipping Forum, General Secretary Xi Jinping pointed out that in line with the new development trend of green, low-carbon and intelligent shipping industry, we should deepen cooperation in international shipping affairs, make every effort to restore and ensure the smooth flow of the global industrial chain and supply chain, and promote the health of the international shipping industry. developing.

Focusing on the development trend of the world's shipping industry, how to grasp the opportunities and challenges brought by the changes in the global economic and trade pattern to the shipping industry, this issue invites three experts to discuss in depth.

  host

  Xu Xiangmei, director and researcher of the Economic Research Department of Economic Daily

  Why is it hard to find a container

  Moderator: What are the specific manifestations of the fluctuations in the shipping market and the container market over a period of time?

What are the main influencing factors?

How do companies respond to market changes?

  Zhou Dequan (Chief Economist of Shanghai International Shipping Research Center): After the outbreak of the new crown pneumonia epidemic, the global shipping demand once fell to a historical freezing point. There has been a sharp rise, and at the same time, the peak season of traditional container shipping has been superimposed, and there has been a rare rebound in the demand for container shipping.

  Taking the US line as an example, at the end of September 2020, the spot container freight from Shanghai to the US and West reached US$3,856/FEU (a container with a length of 40 feet as the international unit of measurement), a sharp increase of 129.8% from the end of May.

At the same time, due to different prevention and control measures, the severity of the epidemic in different regions has been continuously differentiated, and there have been problems in the global manufacturing supply chain, while China has achieved remarkable results in epidemic prevention and control, and the manufacturing industry chain is complete, and a large number of manufacturing demand has exploded. The demand for exported containers by sea has grown rapidly, and a large number of containers have been transported to Europe and the United States. However, due to the blockage of ports and inland logistics in Europe and the United States, containers cannot flow quickly, resulting in a rare phenomenon of shortage of containers. In addition, the impact of the epidemic on the turnover rate of ships , the global container shipping price has repeatedly hit new highs.

At the end of December 2020, the CCFI (China Export Container Freight Index) reached 1,658.58 points, a year-on-year increase of nearly 90%.

  From January to June 2021, the global container liner shipping demand remained at a relatively good level. Affected by the shortage of containers and ships, the global effective capacity supply has been very tight, and the market is in a relatively tight balance.

In this context, the congestion of the Suez Canal and other problems have been encountered, and the global container shipping price has risen again.

At the end of July 2021, CCFI rose to 2930.03 points, with a year-on-year growth rate of 238.5%.

Until the end of September, the container shipping price from China to the United States loosened, but it did not affect the shipping price of major shipping companies.

According to the Shanghai Export Container Freight Index, as of the end of October, the spot container freight from Shanghai to the United States and West reached US$6,414/FEU (a container with a length of 40 feet as the international unit of measurement), a sharp increase of 66.6% over the same period last year.

In November, the Southeast Asian routes saw another surge, and the freight rates of some routes almost doubled.

  To sum up, the factors affecting this round of market volatility are as follows.

One is demand rhythm.

Demand has been concentrated in a short period of time. The US line market in mid-2020 and the Southeast Asian line at the end of 2021 are all affected by the concentrated release of demand after the epidemic.

Second, the effective capacity of ships is insufficient.

Due to port congestion, shortage of truck drivers and pilots, etc., the turnover efficiency of ships has dropped significantly, a large number of ships have been stranded at the port, and the effective market capacity is seriously insufficient.

According to data from shipping industry consultancy Sea-Intelligence, 12.5% ​​of global capacity in August 2021 was unavailable due to congestion and delays.

The third is the impact of container shortage.

In the fourth quarter of 2020, the Container Availability Index (CAx) of various ports in China generally dropped to a very low level, while the accumulation of empty containers in European and American ports reached 2 to 3 times the normal level.

However, due to the short container manufacturing cycle, it has been greatly alleviated at present, and the impact on the market in the future is relatively limited.

  In the future, the international liner container shipping price will remain at a high level, but with the callback of demand growth, as well as changes in ship turnover and container supply, the market may undergo a certain degree of adjustment.

In this case, it is recommended that enterprises make relevant preparations in advance, compare different logistics transportation costs, and comprehensively formulate more scientific logistics plans to enhance the stability and controllability of the logistics chain.

In addition, actively connect with relevant liner companies, increase the proportion of long-term cooperation contracts, strengthen the prediction of the container shipping market, and try to achieve off-peak transportation.

Finally, actively explore the use of hedging tools in the market, and comprehensively use related products such as freight index futures to be released in the future to reduce the comprehensive logistics cost of enterprises.

  How companies manage risk exposure

  Moderator: Do the upstream, midstream and downstream companies in the shipping market have bargaining power over the price fluctuations?

In the face of drastic market fluctuations, how can companies deal with and prevent risks?

  Huang Liunan (Senior Researcher of Guotai Junan Futures Shipping): More than half of the world's top ten container ports are in China, and Shanghai is also one of the most important ports. However, there is still a gap between developed countries in terms of high-end shipping services.

Take London, UK as an example. London's port business has long since declined. However, because 70% of the world's shipping insurance industry and 25% of the shipping financial services industry are located in London, they still have a strong voice in the international shipping market.

From the perspective of the Asia-Pacific region, Singapore, Busan in South Korea and Kobe in Japan are all competing with China for coastal freight resources.

  Under this pattern, Shanghai needs to seek breakthroughs in the innovation of pricing mechanism, infrastructure construction, personnel training, and construction of relevant laws and regulations in order to build an international shipping center.

Among the key elements of shipping construction, it is of great significance to develop the shipping finance industry including shipping derivatives. Futures directly affect the price, and the price determines the profit distribution of the upstream and downstream of the industrial chain. Therefore, the value of the listing of shipping index futures is prominent.

  From the perspective of the upstream, midstream and downstream of the shipping industry chain, in order to prevent the increase in expenses caused by rising freight rates, midstream freight forwarders and downstream cargo owners theoretically need to use shipping index futures to buy more corresponding futures varieties, and futures-side profits can theoretically hedge against rising costs.

Similarly, upstream shipping companies and midstream freight forwarders, especially first-level freight forwarders, can short the corresponding futures varieties on the disk in order to prevent the decline in freight rates and lead to a decline in the profit of capacity sales. Futures profits can hedge against the decline in freight rates.

This is the basic paradigm of serving the real economy with the help of shipping futures.

However, the bargaining power of container freight rates in the middle and downstream of the container shipping market is relatively low at present, and some low-level freight forwarders and ordinary cargo owners have little bargaining power.

Therefore, the listing of derivatives will provide an important risk hedging tool for the middle and lower reaches of the shipping industry.

  The most important thing is to clarify the main pain points in the production and operation of the upstream, middle and downstream of the shipping industry chain.

From the downstream point of view, the global replenishment cycle will start in the third quarter of 2020, and the shipping market will usher in a long-lost boom.

During this period, due to the relatively poor elasticity of the supply side of the container market and the stagnation of logistics at the port side due to the impact of the epidemic, the rate of increase in freight rates was much higher than that in the oil shipping market and the dry bulk market, causing problems for many exporters of finished products. great damage to interests.

Taking air conditioners in the home appliance industry as an example, their production costs mainly include freight costs and raw material costs for bulk commodities.

From the beginning of 2020 to March 2021, the price of copper has risen by about 70%. According to the proportion of copper price accounting for 22% of the cost of air-conditioning, the cost of air-conditioning has risen by about 15%, while the cost of air-conditioning has risen by about 5.4% due to the increase in sea freight in the same period.

Although different industries have different sensitivities to freight fluctuations, the squeeze rate is basically more than 5%, and private enterprises are very sensitive to fluctuations in profit margins of 1% to 2%. There is a strong demand for risk management.

In the first half of 2021, a total of 556 domestic listed companies issued hedging-related announcements, and the atmosphere of corporate participation was strong, creating favorable conditions for the promotion and application of futures tools in the shipping industry, especially the container market. Shipping foreign trade companies can use shipping index futures to develop Hedging of container export freight rates to avoid the risk of freight rate fluctuations.

  Midstream "traders" are the most active and most in need of managing risk exposures in the entire market.

Take Sinotrans Co., Ltd., the largest in the shipping industry, as an example, its profit margin has maintained growth in the past ten years.

However, it is worth noting that many secondary freight forwarders (secondary, tertiary and even other small and medium-sized freight forwarders) cannot have the same ability to lock in agency profits as head forwarders, and these groups have greater risk exposure.

With the launch of container freight index futures, freight forwarders can take advantage of channel advantages to carry out container freight basis transactions. For example, when a large cargo owner signs a freight rate with a secondary freight forwarder, this price may not be the execution price or the agreed price, but a follow-up price. For the price linked to the disk, the contract price is completely linked with the futures price of the disk index. This model also helps cargo owners and forwarders to expand business channels.

  In addition to freight forwarding, a new group has emerged in the logistics industry - cross-border e-commerce.

In the cost structure of cross-border e-commerce, 20% to 30% is the logistics cost, which is very sensitive to the fluctuation of freight rates.

At present, there are two main types of cross-border e-commerce in my country: First, traditional freight forwarders expand logistics business and transform into e-commerce.

This type of e-commerce has a good relationship with upstream shipping companies (including traditional first-level freight forwarders), so they will get better shipping prices, and the operating risks will be less when the freight rates fluctuate sharply.

The second is the evolution from e-commerce to freight forwarding of cross-border e-commerce.

Such e-commerce companies generally do not have the high-quality booking channels of traditional first-level freight forwarders, so they are more suitable for hedging with shipping index futures.

  In addition to futures, companies can also use options for hedging, locking in risks on the production and operation side and earning corresponding benefits on the other side.

For example, small and medium-sized freight forwarders or cross-border e-commerce, because the business models provided to customers are inconsistent, the corresponding options and futures combinations can be embedded in the business to fit the desired price structure.

With the listing of futures, various futures subsidiaries are also able to quote reasonable over-the-counter option prices. The combination of options and futures may help small and medium-sized freight forwarders and cross-border e-commerce expand their business models and provide customers with more abundant services pricing model.

Because of the richness of options, this model can theoretically have a lot of expansion, and small and medium-sized freight forwarders and cross-border e-commerce may become the main driving force for trade with rights in container freight.

  In addition, in the face of drastic freight rate fluctuations, in addition to managing risk exposure through futures and options, companies can also use other methods to prevent risks.

Including: keep inquiries with multiple freight forwarders or booking agents to find the best price; choose FOB (shipping port) or EXW (ex works) quotation mode as much as possible, and let overseas companies bear the risk of freight fluctuations by themselves; With the help of air transport channels to ensure the stability of freight and freight logistics.

Among them, if the CFR (cost + freight) or CIF (cost + insurance + freight) quotation model has to be adopted, supplementary clauses should be added to the quotation contract to deal with extreme market conditions in terms of freight rates and transportation capacity bottlenecks as much as possible, leaving room for to avoid delivery problems.

  On the whole, the listing of shipping index futures will provide a richer anchor for pricing in the entire market, because this price is the standard price, transaction price, and market-approved price, as well as the price given according to different routes and specific regions.

With a complete dimension in time, a richer arbitrage model will eventually be derived, which will help shipping entities to prevent risks, develop the futures market and build the Shanghai shipping center.

  Ensure supply chain security and stability

  Moderator: What are the characteristics of the current development of my country's shipping industry?

What aspects should we focus on to promote the sustainable and healthy development of the shipping industry?

  Fan Yijiang (Researcher, China Academy of Macroeconomics): International shipping, especially ocean shipping, is the main mode of international transportation and cross-border logistics, and the carrier and link of global economic cooperation and trade.

Since the reform and opening up, especially since the 18th National Congress of the Communist Party of China, my country's international shipping has developed rapidly and has become a world-renowned shipping logistics power and shipping trade power.

By the end of 2020, my country's coastal ports had 2,138 berths of 10,000-ton and above, including 428 berths of 100,000-ton and above, 1,499 ocean-going container ships and 1.808 million TEUs. The level of port facilities and fleet Its scale ranks among the top in the world, and its maritime connectivity index ranks first in the world.

In the whole year, the coastal ports completed a cargo throughput of 9.48 billion tons and a container throughput of 230 million TEUs. Among the top ten ports in the world in terms of cargo throughput and container throughput, my country's coastal ports ranked seven, among which Shanghai Port completed the The container throughput was 43.5 million TEUs, ranking first in the world for 11 consecutive years, and its status as a global container hub port was further consolidated.

  Despite the impact of the new crown pneumonia epidemic, my country's international shipping has continued to grow steadily, strongly supporting the needs of cargo transportation with an import and export trade value of more than 32 trillion yuan, and making positive contributions to global trade exchanges and economic recovery.

However, as the global epidemic continues to spread, international shipping is facing enormous challenges, such as tight transportation capacity, port congestion, difficulty in finding a single cabin, difficulty in finding a single container, and rising freight rates, which cannot be effectively resolved in the short term. The stable operation of the chain and the industrial chain and the overall economic downturn are still severe.

  However, it should also be noted that while the new crown pneumonia epidemic has severely impacted the international shipping logistics and the security and stability of the global supply chain, trade chain and industrial chain, it has also optimized and adjusted the global economic and trade cooperation, industrial division of labor, and shipping logistics pattern, as well as the transformation and upgrading of my country's shipping industry. Bring new development opportunities.

It is necessary to accurately grasp the development laws and trends of international shipping logistics, innovate ideas, and focus on the precise connection between international transportation chains, logistics chains and global supply chains, trade chains, and industrial chain organizations. "Hardware" such as port and shipping facilities and equipment and "soft conditions" such as shipping organization, management and service practices will be promoted in coordination, strengthening the in-depth integration of traditional shipping logistics with modern multimodal transport, modern economic and trade circulation, modern industrial operation and other organizational network chains, and accelerating the promotion of international High-quality development of shipping logistics.

  The first is to provide in-depth services for the construction of the new development pattern and the joint construction of the "Belt and Road", to accelerate the construction of a multi-level modern seaport system with high-quality links to the world, and to build world-class ports and world-class port groups.

Optimize the functional layout of hub seaports and branch seaports, focusing on the hub seaports such as Shanghai Port, Ningbo Zhoushan Port, Tianjin Port, Shenzhen Port, Guangzhou Port, Beibu Gulf Port, Xiamen Port, etc., to optimize and strengthen the Yangtze River Delta, Beijing-Tianjin-Hebei, Guangdong-Hong Kong-Macao , Beibu Gulf and other world-class port groups.

High-standard construction of Shanghai International Shipping Center, Tianjin North, Xiamen Southeast, and Dalian Northeast Asia International Shipping Center.

Promote the coordinated development of coastal ports, domestic rivers and lakes ports, and inland dry ports.

Strengthen the linkage layout of overseas hubs and ports, strengthen the support of alternative ports and port areas, improve the comprehensive supporting capabilities of overseas terminal nodes in transportation and logistics, and comprehensively improve the level of access to the global circulation network and the ability to integrate and allocate resources.

  The second is to focus on the stability of the global supply chain industry chain and the security of strategic materials, optimize the international route network by classification and division, and innovate the shipping logistics organization model such as interline transit.

Systematically improve the maritime international transportation channels such as the Silk Road on Ice through Japan and South Korea to the Americas, through Southeast Asia to Oceania, through Southeast Asia and South Asia, through the Indian Ocean to Europe and Africa, and through the Arctic Ocean.

Strengthen the global container shipping trunk network, improve the connection function of international shipping hub organizations, and optimize and encrypt sub-regional international routes and flights for RCEP countries.

Expand the shipping logistics network for bulk materials in an orderly manner, and strengthen the transportation guarantee capacity for key materials such as oil products, iron ore, grain, and natural gas.

  The third is to accurately complement the shortcomings of ports and supporting facilities, optimize the fleet capacity structure and equipment level, and comprehensively promote intelligent, digital and green upgrades.

Accelerate the improvement of the functions of berth facilities in key ports, strengthen facilities such as waterways and anchorages, strengthen the construction of large-capacity and professional collection and distribution systems, and improve facilities and equipment such as ports, border inspections, and emergency epidemic prevention.

Promote the application of new technologies such as big data, the Internet, artificial intelligence, and blockchain, strengthen digitalization and informatization empowerment, and accelerate the construction of unmanned, automated, and intelligent terminals, digital waterways, and digital anchorages.

Focus on the "dual carbon" goal, and speed up the greening and low-carbon upgrading and transformation of port and shipping facilities.

Strengthen the construction of professional shipping fleets, improve the dynamic adjustment mechanism of the scale and structure of shipping capacity, vigorously promote the application of new energy, intelligence, digitization, ships and equipment, and improve the technical level and international competitiveness of my country's container, crude oil, dry bulk, and special shipping fleets and operational security.

  The fourth is to build a high-standard international shipping market, improve the rules of international shipping and logistics, cultivate comprehensive shipping and logistics enterprises, expand financial service functions, and improve the international service capabilities of the whole chain.

In line with the adjustment trend of the global economy, trade and shipping and logistics patterns, it will form a mechanism based on international practices and traditional international rules, and deeply participate in the revision and adjustment of the general rules of global shipping and logistics rules.

Improve the construction of diversified and interconnected markets, cultivate and expand comprehensive leading enterprises and professional leading enterprises in shipping and logistics with the ability to connect international factors and global network operation, and strengthen cooperation with upstream and downstream enterprises in the supply chain such as production, trade, finance, insurance, and digital. In-depth linkage, give full play to the role of functional platforms such as international shipping centers and shipping exchanges, focus on expanding functions such as finance and insurance, and strengthen the professional market's early warning and adjustment capabilities for fluctuations in the international shipping and logistics market.

Build a global circulation market for standardized shipping units such as containers to ensure the circulation and scheduling of shipping containers.

Deepen and innovate international cooperation methods, actively build bilateral and multilateral international port and shipping logistics and multimodal transport alliances, and enhance the coping ability of risk coordination and sharing.

  The fifth is to strengthen the reserve of alternative and supplementary emergency international transportation and logistics capacity, and improve the dynamic safety emergency guarantee adjustment mechanism.

In response to the increasing pressure on the smooth flow of global foreign trade goods, speed up the construction of an international transportation and logistics organization and operation network organically coordinated with new infrastructure such as sea transportation, cross-border land transportation, aviation, etc. The train, the Central Asia train and other division of labor, cooperation and organizational connection, create a high-quality cross-border logistics chain, and ensure the safety and stability of the international supply chain industry chain.

Further improve the dynamic adjustment mechanism, organization method and emergency response plan, and coordinate the epidemic prevention and control work and production operation of key facilities, important links, and key groups.