“Have the freight rates not ended yet? They are already extremely high.” Zhou Ming (pseudonym), the person in charge of a foreign trade company in Tianjin, has been very upset recently. There are rumors in the market that shipping companies will start charging peak season surcharges starting from June. , Zhou Ming didn’t know whether to wait and see or grab a seat first.
On May 21, the China Export Container Comprehensive Freight Index released by the Shanghai Shipping Exchange was 2216.63 points, an increase of 3.9% from last week. Shanghai’s export container comprehensive freight index was 3432.50 points, an increase of 2.7% from the previous period.
The industry is helpless with freight rates frequently reaching new highs. Wang Muxin from Beijing Haolimo Law Firm criticized these liner companies for constantly increasing freight rates, which not only offsets the country’s original intention of canceling port construction fees, but also greatly increases the operating costs of import and export companies. He believes that shipping alliances are colluding to raise prices. Recently, the Korean Fair Trade Commission has decided to conduct anti-monopoly investigations into several Korean liner companies such as HMM and Hung-A Shipping. Chinese anti-monopoly agencies should also use legal means to prevent this behavior of liner companies operating in the country.
The worries of small cargo owners
” The current price is already three or four times that before the epidemic.” Zhou Ming told reporters that his goods mainly go to the eastern route of the United States. At the end of last year, the freight rate had doubled compared with before the epidemic. In January and February this year, it was still The prices at the end of last year were maintained, but starting from April, space became tight again and prices began to soar. The price of a 20TEU container rose to US$7,000, and the price of a 40TEU container in May was as high as US$13,000.
April every year is the time when cargo owners and shipping companies sign contracts for a new year. In previous years, shipping companies would come early to negotiate and require cargo owners to promise cargo volume and lock cabins. Unexpectedly, This year, shipping companies are uncharacteristically no longer actively asking questions. Some shipping companies have even canceled this year’s long-term contracts and implemented market prices.
With years of relationships, Zhou Ming’s company can only obtain a small amount of shipping space, accounting for only 20-30% of its demand. The rest has to go to the market to find shipping space to fill all the space. need. The freight price of the long-term agreement signed with the shipping company is far lower than the market price. Take Zhou Ming’s contract price as an example. He got different long-term contract prices from different shipping companies. He also went to the East United States. State-owned enterprises like COSCO Shipping will give a very low price per box out of social responsibility. It’s only 4,000-5,000 US dollars, but other shipping companies’ prices are more expensive, some are 6,000-7,000 US dollars, and some are more than 8,000 US dollars, but overall it’s still much cheaper than the market price of 13,000 US dollars.
However, although the long-term agreement price of the shipping company is low, the space it can provide is too few. With so many shipping companies, Zhou Ming can only get 5 or 6 container spaces in total every week, and other gaps need to be found according to market prices. “The price during this period of fluctuation is just like an auction. If you bid too low, there is no chance. The one with the highest bid will win.” Zhou Ming said that when he first entered the industry, he encountered a strange thing that the space could be recovered after it was released, “because the original bid was too low. , the freight rate rose again when the shipping date was approaching, so the shipping company took back the space promised to Zhou Ming and resold it.”
Why did freight rates reach new highs?
Zhou Ming’s anxiety resonates with millions of small cargo owners.
Cai Jiaxiang, executive vice president of the China Shippers Association, said that the increase in freight rates will definitely affect the profits of cargo owners, and some cargo owners even paid nearly 10 times more freight. Faced with soaring freight rates, Li Zhimin, vice president and secretary-general of the China International Freight Forwarders Association, believes that my country’s foreign trade companies will ultimately suffer. “Freight forwarders don’t have to make compensation, but foreign trade companies will face claims if they don’t ship the goods.”
On April 29, the Ministry of Transport responded to complaints from small cargo owners in Shandong, saying that due to the combined effects of multiple factors, the demand for international container transportation has been intensively released since June 2020. In addition to necessary maintenance, major liner companies In addition to maintenance, basically all the ship’s shipping capacity has been put into the market. Affected by factors such as labor shortages caused by the spread of the overseas epidemic, serious congestion has occurred in ports in the United States and Europe since the fourth quarter of 2020. For example, the Port of Los Angeles and the Port of Long Beach, which are the most congested in the United States, currently have more than 30 container ships waiting to berth, 85% Ships need to be anchored for at least 8 days before they can operate; container cargo can stay at the terminal for up to 2 months. European routes generally call at multiple ports. Due to congestion in all major ports of call, the entire voyage time is lengthened. Congestion at foreign ports, disordered logistics supply chains, and reduced efficiency have led to widespread delays in container liner shipping schedules. The on-time rate has dropped from more than 70% to the current level of about 20%, seriously affecting the operating efficiency of container ships and exacerbating the container shipping crisis. There is a conflict between supply and demand for shipping capacity and empty containers.
The global economic recovery has led to a recovery in shipping demand and driven up shipping prices. Moreover, the Suez Canal incident caused limited shipping capacity and reduced short-term supply, leading to an accelerated recovery in shipping prices. In fact, in addition to the surge in container shipping prices, at the end of April, the Baltic Dry Bulk Index also rose to a new high since 2011, reaching 3,053 points.
Therefore, the Ministry of Transport stated that problems such as tight shipping capacity, shortage of empty containers, and rising freight rates have become global problems, and freight rates have also increased in Vietnam, India, South Korea and other countries. With the rapid rise, freight rates on some major routes have exceeded those of my country. Regarding the above situation, the Ministry of Transport attaches great importance to it and actively coordinates relevant liner companies to optimize the allocation of ship capacity on China routes, increase the capacity of China routes and return empty containers, and try to reduce overseas shipping costs.The impact of large-scale shipping delays caused by port congestion on China’s import and export transportation.
It is worth noting that the current factors affecting shipping prices have not yet taken into account the risk of crew shortage. However, after the epidemic in India worsened, infected crew members have begun to appear, causing the epidemic to spread rapidly on ships. Spread situation. At present, ports in Singapore and the United Arab Emirates have banned ships from replacing crew members who have recently arrived from India, and my country’s Zhoushan port has also banned the entry of any ships and crew members who have visited India and Bangladesh. According to relevant statistics, there are 1.6 million seafarers in the world, of which 240,000 are from India, accounting for about 15%. Once these crews are unable to take regular shifts, it will not only disrupt the shipping company’s scheduling plan, but may also lead to a surge in crew wages in other countries due to the lack of Indian crew members.
The shipping industry calls for widespread vaccination among crew members as soon as possible. COSCO Shipping responded to the 21st Century Business Herald that the company’s main ships have arranged for crew members to board the ship. The vaccination rate has increased from January has increased from 3.1% to the current 100%; crew members waiting ashore have also been fully accommodated.
Lawyers blast shipping companies for price increases
What makes Zhou Ming and other small cargo owners and small freight forwarders even more worried is that the current freight prices are “high” and many shipping companies are brewing a new wave of price increases, which will take effect from June 1.
For example, on the Pan-Pacific route, MSC informed that 20TEU small containers will increase by US$800, 40TEU will increase by US$1,000, and CMA CGM will increase slightly by US$900 and US$1,100 respectively. Zhou Ming worried that the value of his company’s goods is quite high, and freight has already accounted for 40% of the cost. Those companies with low value may have a higher proportion of freight, and their profits are unimaginable.
Wang Muxin from Beijing Haolimo Law Firm worked in a shipping company in his early years, and later obtained a lawyer’s license, and has always been concerned about the shipping industry. He believes that although there are market factors for this transport capacity imbalance, it is also because the shipping companies made inaccurate judgments and did not actively increase transport capacity and try to increase the inventory of empty containers. Instead, they deliberately created various excuses to drive up freight rates. Taking Yantian Port to New York, USA as an example, the freight rate for a 40-foot heavy container exported from Yantian to New York was US$2,300 before the beginning of 2020. As of May 2021, the freight rate has soared to US$12,750. In one year, freight rates increased by 5.54 times.
He pointed out that in order to effectively reduce the burden on shipping companies, the state has canceled a number of shipping fee items. Especially during the epidemic, port fees such as port construction fees have been greatly reduced or waived. The purpose It is to ensure the normal operation of the enterprise. However, as liner companies continue to increase freight rates, they not only offset the country’s original intention to cancel port construction fees, but also greatly increase the operating costs of import and export enterprises.
At the same time, shipping companies’ profits in the first quarter hit new highs. Wang Muchin said that from a shipping financial perspective, if the ratio of a shipping company’s annual net profit to operating income can reach 3%-5%, it will be considered a good year. However, Hanxin Shipping’s profit margin has reached 42%, and Evergreen Shipping’s profit margin has reached 14%.
Wang Muxin believes that the liner companies will shift the responsibility for the shortage of transportation caused by their own reduction of transportation capacity to the cargo owners, use the tight market supply and demand as an excuse to increase freight rates, and then fabricate a tight market for empty containers. The atmosphere has created a situation where it is difficult to find a box, and the shipping alliance is indeed suspected of collusion or coordination. Recently, the Korean Fair Trade Commission has decided to conduct anti-monopoly investigations into several Korean liner companies such as HMM and Hung-A Shipping. Chinese anti-monopoly agencies should also use legal means to prevent this behavior of liner companies operating in the country. </p