China News Service, September 24th (Xie Yiguan, a reporter from China-Singapore Finance and Economics) "Send from China to the United States, starting from 10 jin by sea, free packing, 14 yuan/jin", "Send from China to Malaysia, 20 jin and 46 yuan, including tax", "From China to Canada, the shipping fee is as low as 15 yuan per kilogram"...
Many people may have noticed that the price of sea freight has recently dropped to a new low for the year.
Last year, it was still "hard to find a box" and the price of international shipping was "surging". Why did the temperature suddenly drop this year?
Data map: Ningbo Zhoushan Port.
Photo by Tang Jiankai
The freight rate has fallen by more than 60% from the high point of last year
A reporter from China-Singapore Finance reviewed several domestic export container freight indices and found that after a wave of decline in the first half of the year, the freight rate continued to decline in the second half of the year.
On September 16, the Shanghai Export Containerized Freight Index (SCFI) was 2312.65 points, down 9.7% from the previous issue, and has been declining for 14 consecutive weeks.
The freight rates of major routes all fell, among which, the routes of the West America, the Persian Gulf, the Mediterranean Sea, and the South America dropped significantly, with weekly declines of 12.5%, 16.8%, 10.5% and 11.7% respectively.
In addition, the Freightos Baltic Index (FBX) shows that on September 21, the global container freight rate was US$4,179/FEU.
On September 13, 2021, the global container freight rate once soared to $11,134.44/FEU.
This also means that the current freight rate has dropped by more than 62.5% from the high point of last year, which is equivalent to the freight rate level in January 2021 from the perspective of the trend chart.
The staff of an international freight forwarding company in Tianjin gave an example to a reporter from Zhongxin Finance. A 40-foot standard container was shipped to the West Coast of the United States. At the beginning of the year, the freight was about 10,000 yuan. Now it only costs about 3,000 yuan, and the price has dropped by more than 60%. .
Last year's peak was between 12,000 and 14,000 yuan.
"Although the price has dropped significantly, the current price is not as low as it was before the epidemic. Before the epidemic, the same standard box, the freight cost only about 1,500 yuan." The staff member said.
In July, the container throughput of Yangshan Deepwater Port exceeded 2.1 million TEUs.
Photo courtesy of Yangshan Border Inspection Station
Why does sea freight price take the "slide"?
In 2021, due to supply chain disruption, port backlog and cargo surge, international importers are scrambling to seize the space of container ships, international freight rates will soar, and many shipping companies will make a lot of money.
At the beginning of the year, the news of "Evergreen Shipping's year-end bonus issue of 40 months of monthly salary" made people call it "too embarrassed".
However, as Mei Xinyu, a researcher at the Institute of International Trade and Economic Cooperation of the Ministry of Commerce, said, "From 2020 to 2021, the freight price will rise unprecedentedly, which is not a long-term sustainable phenomenon. It is only a matter of time before it falls."
"The rapid reduction of freight rates this year is due to the rapid growth of freight capacity. A downward trend." Mei Xinyu told a reporter from Zhongxin Finance and Economics.
“Starting with the Federal Reserve, Western governments have tightened monetary policy more than expected this year and at a faster pace. Tighter monetary policy is coupled with geopolitical factors, and international trade growth expectations have weakened, while shipping capacity has increased. In this case, freight rates have fallen. It makes sense." Mei Xinyu added.
The data showed that the U.S. import commodity price index (excluding petroleum and petroleum products) had a negative month-on-month growth for three consecutive months from May to July.
The value of U.S. seasonally adjusted imports fell for two consecutive months from June to July.
The National Retail Federation (NRF) lowered its forecast for U.S. demand in the second half of the year, predicting total retail shipments arriving at major U.S. ports of about 12.8 million TEU, down 1.5% year-over-year.
Is the "era of huge profits" over for shipping?
Although shipping freight rates have fallen, due to the fact that freight rates are still at a relatively high level, shipping companies continued to be "rich and oily" in the first half of the year. ", crushing a number of listed companies.
Screenshot of COSCO SHIPPING Holdings' semi-annual report.
However, a recent HSBC Global Research report predicts that container shipping will experience an inevitable downward cycle in 2023-24, with profits plummeting by 80%.
Several institutions, including HSBC, expect the mismatch between the decline in global container trade and the increase in shipping capacity will drive freight rates further down.
In Mei Xinyu's view, the drop in shipping prices during this period is a bit too steep, and as the situation changes during the year, the freight may fluctuate.
"In addition, with the rise in tolls, etc., freight prices may rebound. In the long run, there is still potential for growth in capacity demand."
Not long ago, the Egyptian Suez Canal Authority issued a statement that it will increase the tolls of ships in the Suez Canal in January 2023.
Tolls for cruise ships and ships carrying dry cargo will increase by 10%, and tolls for the rest of the vessels will increase by 15%.
The Suez Canal is located at the junction of Europe, Asia and Africa, and is one of the most frequently used waterways in the world.
According to foreign media reports, as labor negotiations at U.S. West Coast ports have stalled recently, many importers are moving goods from the West Coast by longer and more expensive routes to ports on the East Coast and Gulf Coast.
The surge in cargo has caused congestion at terminals and ships at several of those ports.
Previously, the Shanghai Shipping Exchange also stated that the serious congestion of overseas ports has not been resolved, and the loss of container capacity will still be one of the main factors affecting the supply and demand relationship in the shipping market and the fluctuation of market freight rates.
In addition, the complex and changeable situation of the new crown epidemic, geopolitics, and inflationary pressures under the adjustment of energy and food supply patterns have all caused great uncertainty to the demand for foreign trade freight.
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