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The Secrets Behind "Crazy" Shipping

2021/1/13 7:26:00 0

ShippingBehind The ScenesSecret

At the beginning of the new year, a new round of freight increases affect the heartstrings of many foreign trade enterprises.

According to the Baltic daily freight index on January 8, the freight rates from Asia to the West and the east of the United States rose by 1.5% and 8.5% month on month to US $4263 / feu and US $5862 / feu. The US line freight rates continued to rise from the middle of September last year to the end of this month. The Asian to European and Mediterranean freight rates rose by 10.6% and 4.0% to US $7731 / feu and US $7383 / feu. According to the fourth quarter of 2020 China's shipping boom report released by Shanghai International Shipping Research Center, 91.67% of container transportation enterprises said that the shortage of containers will last for three months or more. The mismatch between supply and demand continues to push up freight rates, with eight major trans Pacific East bound container shipping lines saying last week that they will raise their combined rates and surcharges by $1000 from February 1, 2021.

Shipping prices have continued to rise in the past half a year, which has led to rising costs for foreign trade and freight forwarding companies. Recently, China International Freight Forwarders Association and China Association of foreign trade and economic cooperation enterprises jointly wrote a letter to the Department of service and trade and the Department of foreign trade of the Ministry of Commerce. The request for instructions on strongly calling for investigation and punishment of arbitrary price and charge behavior of liner companies requires investigation and treatment of arbitrary price and charge behaviors of liner companies 。

Are shipping companies really responsible for this crazy round of freight rates? The reporter of 21st century economic report has investigated the rise and fall factors behind the shipping price, and found that the dominoes with unbalanced industrial chain have already fallen down. It is useless to blame the shipping company only by drawing out one ring. This maritime storm needs the whole industry chain to break through together.

Ice and fire in the first and second half of the year

According to the statement in the "request for instructions on strongly calling for investigation and punishment of arbitrary price hikes and arbitrary charges of liner companies", ocean freight rates have increased several times over the beginning of last year, with the highest value of US $5500 / container for the US east route and US $5000 / container for the European route. Meanwhile, various high surcharges have poured in, greatly affecting the rights and interests of foreign trade enterprises and international freight forwarding enterprises.

Foreign trade companies and freight forwarding companies feel aggrieved, and shipping enterprises are also distressed because the shipping industry is a global competitive industry, and the fluctuation of freight rates is completely determined by the relationship between supply and demand in the market. The rise in freight rates since the second half of last year is precisely the result of market self-regulation.

According to the latest data, on December 31, 2020, China's export container freight index (CCFI) was 1658.58, up 84.8% in the whole year, but the average price in 2020 was 984, only 19.5% higher than that in 2019, and still lower than the base period index of 1000 points. Since 2016, CCFI has bottomed out and rebounded, but the overall level is still lower than that before the outbreak of the financial crisis. In 2020, the average price of Shanghai SCFI composite index is 1265, which is significantly higher than that in 2019, but still lower than the average level in 2010.

Alphaliner, an authoritative shipping advisory body, once made a calculation. In terms of nominal prices, the CCFI index fell by more than 25% between 1998 and 2018. However, after adjusting for inflation, the actual sea freight has dropped by as much as 50%. In spite of the increase in freight rates in 2020, the annual average level of nominal CCFI is still 10% lower than that in 1998. If inflation is taken into account, the decline may be even greater.

In fact, over the years, the shipping market has been fully competitive, the supply of transport capacity has exceeded the demand, and the freight rate has been depressed. As a result, the rate of return on investment in the global liner industry is far lower than the average level of the market. Most of the liner companies have been hovering at the edge of loss for a long time, and some of them are facing the dilemma of bankruptcy and reorganization. The increase of merger and acquisition cases in recent years is the result of market competition and selection. According to alphaliner's financial report data, in addition to Maersk, Dafei and other leading liner companies, nearly half of the liner companies, such as modern merchant shipping, Yangming shipping and Hanjin Shipping, which declared bankruptcy in 2016, had a negative annual average operating profit in recent 10 years.

After the outbreak of new crown pneumonia, according to CTS data, in the first may of 2020, the global transportation volume decreased by 7.7%, the first decline since 2010. When the market was at its lowest, container throughput at China's major ports fell by 20%.

The huge difference between the resumption of work and the production stagnation caused by the out of control epidemic situation in Europe, the United States and other countries and regions made China's export trade rise sharply. According to the data of the General Administration of customs, in the first 11 months of 2020, the total value of China's foreign trade import and export was 29.04 trillion yuan, and the import and export had achieved positive growth for six consecutive months. In November 2020, China's total import and export value was 3.09 trillion yuan, with a year-on-year growth of 7.8%. Among them, exports reached 1.8 trillion yuan, up 14.9% year on year.

Zhang Shouguo, executive vice president of China Shipowners Association, pointed out that the proportion of China's trade in Global trade has increased from 16% to 20%, resulting in a large number of shipping containers exported from China to the world. Shipping is a barometer of the world economy. It can be said that the current freight rate also reflects the international market demand for China's foreign trade. But at the same time, it also caused the serious imbalance of container import and export.

However, it takes time to recover the capacity, even if the shipping companies change the size of the ships on individual voyages and suspend or cancel part of the suspension according to the changes in demand side. By the end of December 2020, the weekly transportation capacity of trans Pacific route market has been close to 530000 TEU, increased by about 25.6% over the same period of last year, and has reached the historical peak. Not only trans Pacific routes, but other routes are also accelerating their recovery to supply the demand market.

According to the data provided by China Shipowners Association, the vacancy rate of global container ships has dropped from 12% in the first quarter of 2020 to 1.5% in October of that year. The world's container capacity of 23 million TEUs has been put into the shipping line, with the transportation capacity and container volume reaching the highest level in history.

According to the third-party data of capacity supply and cargo demand provided by alphaliner and drew ry, in 2016, the global container fleet had a capacity of 20.33 million TEUs and the global liner cargo volume was 195 million TEUs. In 2020, the global container fleet will have a capacity of 23.88 million TEUs, and the annual liner freight volume is expected to be 215 million TEUs. In the past five years, the transportation capacity has increased by 17.5%; the freight volume has only increased by 10.3%; the average annual transportation capacity supply has increased by 4.3%, and the average annual freight volume demand has only increased by 2.6%.

In other words, from the data point of view, the supply of transport capacity in the market should be sufficient in theory, and the freight rate should be stable. Why would there be a "surge" situation? This has to mention the complex factors affecting freight rates.

Industrial chain disrupted by epidemic situation

"There are many key factors in sorting out the ups and downs of shipping logistics market in 2020." Wu Bingqing, President of Maersk Greater China, said that the market was sluggish in the first and second quarters of 2020 because of the outbreak of new crown pneumonia. After that, due to the strong epidemic prevention and control, in the second quarter, the domestic industry returned to work and production, production resumed rapidly, and the transportation market demand began to change greatly, including a large number of epidemic prevention materials produced in China were transported to various countries in the world, the overstocked goods in the first quarter needed to be shipped, and the goods transported by air were transferred to sea due to the cancellation of passenger flights, etc.

Wu Bingqing said that due to changes in people's consumption patterns, demand in the US market rebounded and quickly spread to the global market. "At present, due to the continuous increase in the demand for replenishment of inventory in the US and European markets, the lack of transportation capacity of ships, containers and container trucks, and the uncontrolled epidemic situation in foreign countries, the labor shortage in destinations such as Europe, the United States, Australia and New Zealand, and the significant decrease in the operational efficiency of ports, warehouses, storage yards, inland transportation, etc., has a serious impact on the global supply chain."

In fact, the shipping industry can also be regarded as a labor-intensive industry, with a large number of jobs requiring human resources. Not only in the process of transportation, the port loading and unloading at both ends of the transport, goods in and out of the warehouse yard and inland circulation also need a lot of manpower. Although the ports and transportation in China have been unimpeded, with the severe epidemic situation in foreign countries, the normal production order of countries including Europe and the United States has been damaged, the congestion of overseas ports has been intensified, and the truck, warehouse and railway have also been seriously congested and delayed due to the impact of the epidemic, resulting in the decline of the efficiency of the whole supply chain. I'm afraid we can't really solve the problem by increasing the shipping capacity and the supply of containers.

It is reported that at the beginning of the new year in 2021, Los Angeles, the largest port in the United States, is once again in serious congestion, with a large number of ships queuing at the wharf. According to a report last week by the Southern California ocean exchange, 34 container ships were moored in San Pedro Bay, breaking the previous month's record of 23. Five more ships are due to arrive, four will dock in Los Angeles or long beach ports, and the ocean exchange reports that conventional anchorages are full and some emergency anchorages are occupied. Due to congestion in the surface transport supply chain, the time taken to transport containers from the terminal has been extended, which means that there will be no space for container ships to berth in Los Angeles and long beach in the next few days, and the average waiting time is expected to increase to about two weeks.

In addition to the United States and the United Kingdom, the severe shortage of work teams caused by gale weather and the new crown pneumonia epidemic reduced the operation efficiency of the wharf by more than 40%. The yard was crowded and the circulation of boxes was very poor. In addition, the impact of Christmas and new year's Festival, the average waiting time was more than 12-14 days, and the overtime was serious, often more than 1 day.

Due to strong wind weather and epidemic prevention and control in Sydney port, Australia, the resource shortage and operation efficiency of work teams have been significantly reduced. The exchange capacity of each ship has been limited at DPW terminal, and the average waiting time is about 5-10 days.

Due to the epidemic prevention and control, the resource shortage and operation efficiency of the work team in the port of Basang in Southeast Asia were mainly affected by the epidemic prevention and control. The improvement was made in October last year. However, with the upgrading of epidemic prevention measures, the congestion situation in November turned worse again. At present, the utilization rate of wharf and yard is over 95%, and the average waiting time is about 3-4 days, basically different berthing in the same period of last year.

Due to traffic congestion, full stockyard, low operation efficiency, closure of new crown pneumonia and rainy season, waiting time of port in Nigeria is about one month.

According to Drewry, a shipping consultancy, congestion at terminals has become a global problem. Port congestion and increased waiting time will further reduce the reliability of shipping schedules. Due to port congestion and low operational efficiency, the number of single vessel turnover has dropped from 170 in 2019 to 121, according to the shipping companies.

Port congestion not only reduces the efficiency of ship operation, but also reduces the efficiency of container circulation. "Many foreign terminals are unable to empty empty empty containers in ports in time. In some ports, the empty container stockpile is three times the normal level, and empty containers cannot be transported back to Asia in time." Wu Bingqing said that many businesses use the container yard in the port as the storage site of their import containers, and only pick up some containers that must be picked up. In addition, with the increasing demand for e-commerce products storage, many warehouses have been filled with goods, and the container turnover time has been infinitely prolonged. "The combination of various factors has led to a serious shortage of containers in the past few months." From the perspective of total container equipment, drew predicts that the decline of container equipment in 2020 will be less than the port throughput, which indicates that the market is not really short of containers, but that containers are not "in the right place at the right time".

The shortage of truck drivers, railway transport capacity, slow pick-up and return of containers by customers also affect the efficiency of container circulation, making it impossible for overseas containers to return to the Far East in time for export service according to the original schedule. The container turnover efficiency has dropped by more than 10% compared with that before the epidemic, resulting in a serious shortage of domestic container supply and the need to invest more new containers to meet the needs of export customers Please. "In the face of tight transport capacity and lack of containers, Maersk has been making every effort to take measures to improve the efficiency of empty container turnover by using all available vessels and containers while cooperating with customers and suppliers, so as to alleviate this short-term situation." Wu Bingqing said the company was purchasing or leasing all available container resources in the market in order to be able to provide customers with alternative container types. It also suspended the elimination of containers and repaired them at a higher cost to ensure their serviceability.

"From June 2020 to the end of 2020, COSCO Shipping has added 40 ships, and its capacity has increased by 200000 TEUs, and the capacity has increased by 7%. At the same time, 650000 TEUs of new containers have been put into the market, and the company's container ownership has increased by 15%. At present, the company is taking a variety of service guarantee measures to meet the growth of China's foreign trade demand for shipping capacity and container equipment

In order to make up for the delay caused by terminal congestion, guarantee the route service and accelerate the callback of empty containers, many shipping companies have increased their vehicles to sail at high speed at the expense of fuel consumption. Shipping companies, including COSCO Shipping and Maersk, have also announced that they will reduce the temporary suspension usually deployed during the Spring Festival in China, which can serve empty container transportation.

Container dilemma

The 21st century economic report once reported the shortage of containers in the foreign trade market. Relevant ministries and local governments as well as relevant enterprises are trying to increase production. "In fact, container production has increased, and container factories have increased the supply of new containers, but the shortage of labor and the rising cost of container manufacturing are restricting the supply of containers." Li qianmin, general manager of Shanghai Huanyu logistics equipment Co., Ltd., one of the container manufacturers, said.

It is understood that after experiencing the low order level in the first half of 2020, container orders will gradually increase from July 2020. China's container manufacturing enterprises have greatly increased their output since August. In order to meet the rapid changes in the market and container demand, container manufacturing enterprises have opened up full power to ensure supply.

Globally, the industry's container production will reach 2.71 million TEU in 2020, 12% higher than that in 2019. Among them, the market was sluggish in the first half of the year, and the output was only 890000 TEU in the first half of the year, with a year-on-year decrease of 40%. In the second half of the year, the market was booming and the production capacity increased to 1.82 million TEU, with a year-on-year increase of 93%. In December, the monthly output of 440000 TEU reached a record high in a single month.

"At present, the container manufacturing plant has been fully loaded, and various ways have been adopted to promote production." Li qianmin said that the company's production hours increased from 8 hours per shift to 11 hours. With the addition of new equipment, process improvement and production capacity, the factory has increased the daily production efficiency by more than 60% and increased the recruitment and training of personnel.

Despite the efforts of various parties, the current production of new boxes still can not meet the market demand. It is reported that the new orders have been scheduled to the second quarter of 2021. But at the same time, the increase of production capacity is restricted by the upstream raw material supply and skilled workers shortage, and the current record high single month production is still difficult to make up for the gap of export container demand.

The surge in demand is gratifying. On the other hand, the cost of making boxes has soared. It is understood that the raw material prices of upstream suppliers are rising rapidly. The base price of container special steel increased from the lowest 3680 yuan / ton in April 2020 to 5670 yuan / ton at the end of December, with an increase of more than 50%. Except for a slight correction in October, the price has been rising. The floor price has been rising since August. In early August, the floor price was 3500 yuan / m3. By the end of December, it has risen to 6000 yuan / m3, up more than 70%. It is expected that the price will continue to rise in the future.

Flooring is not only rising in price, but also unable to ensure timely supply. Some container manufacturers said that the floor factory could not recruit enough workers to expand production near the Spring Festival. Because there was no demand in July last year, the floor factory workers either returned home or went to other enterprises for employment. When the demand for containers and flooring increased in October last year, the flooring factory found that the workers who had found jobs would not return to the floor factory. Contact the workers who have returned to their hometown without finding a job. The workers think that they will have a long Spring Festival holiday in only three months, and they are not willing to come out to work. Most of the workers reply to come back to work after the Spring Festival.

On the other hand, there is a shortage of raw materials. Because the demand for containers is insufficient in mid-2020, the container factories take turns to have holidays, and the floor factories dare not prepare too much raw materials, but just barely maintain the production at that time. When the demand suddenly increased, the floor factory found that the bamboo curtain factory that had been supporting them either transformed to produce other products, or closed down because there was no demand. In addition, the continuous rain in the main bamboo producing areas in September and October 2020 makes it impossible to cut down the Moso Bamboo in the mountains, resulting in the shortage of raw materials for the flooring plant.

At the same time, container manufacturing enterprises are also faced with the problem of the loss of skilled workers. At present, there is a shortage of labor market, so it is impossible to recruit workers with box making experience in a short period of time. However, if workers without relevant working experience are recruited, it will take a period of time to carry out skill training and can not immediately take up their posts to meet the production needs. According to the survey, the inventory of new containers in China's container manufacturing enterprises is far lower than the average level in previous years, which is at the lowest level in history.

China Container Industry Association has paid attention to the serious imbalance between supply and demand of domestic containers. In November 2020, China Container Industry Association issued an action proposal on container industry chain to make concerted efforts to stabilize foreign trade and promote growth. It proposed that container production related enterprises should continue to improve production efficiency, continuously tap potential capacity, improve process equipment, increase the number of workers, improve the labor skills of workers, and make every effort to guarantee The order for new cases will be delivered as soon as possible. In order to improve the imbalance between supply and demand of containers, container material supply enterprises should try their best to ensure the supply of raw materials and avoid affecting the production of container manufacturing members due to the shortage of raw materials.

The whole industry chain breaks through together

In fact, shipping companies have explained to the China Shipowners Association the problems of transport capacity, supply chain and containers. On the afternoon of December 29, 2020, China Shipowners Association held a "container shipping market research meeting" in Shanghai to discuss the issue of relieving the market pressure of container transportation and how to improve service. Representatives of shipowners engaged in international container transportation, such as Maersk, COSCO, Dafei, Sinotrans, evergreen, Yangming and Haifeng International, attended the meeting.

At the above-mentioned research meeting, China Shipowners Association called on upstream and downstream enterprises, container factories, terminals and other industrial chain parties of container transportation to make joint efforts to actively deal with the industry difficulties. In addition, shippers and shipping companies should also strengthen cooperation to face challenges and seek development together with all business links of the whole logistics supply chain.

Shipping logistics enterprises connect the upstream and downstream of the industrial chain, which is the main force of important material transportation, and is responsible for opening up the logistics lifeline for the industrial chain. The epidemic situation caused the slow and stagnation of global logistics, and brought profound adjustment to the global supply chain and trade pattern. In the past year, in the face of the challenges brought by the epidemic situation, liner companies have been coordinating in many ways. On the one hand, they have made every effort to create a green channel for the supply of medical and living materials and provide important transportation support for the front-line prevention and control. On the other hand, we should try our best to break through the blocking and breaking points, continuously improve the international freight transport capacity of the industrial chain supply chain, and fully guarantee the stability of the global supply chain industrial chain.

With the gradual recovery of demand, liner companies are trying to release capacity to meet the demand. According to alphaliner data, since June 2020, more than 2.2 million TEU idle transport capacity has been restored to operation, more than 600000 TEU of new ships have been delivered, increasing effective supply; in 2021, there are still more than 1.1 million new ships to be delivered. The above investment of nearly 4 million transport capacity will gradually relieve the pressure. In view of the situation that the epidemic situation leads to land congestion, aviation interruption and transportation capacity shortage, powerful liner companies are also making efforts to break through the supply chain breakpoints, connect upstream and downstream industries, and strive to ensure the smooth global supply chain through a series of new modes, such as "land to water", "land to rail", "rail to water" and "air to water". Blockchain technology, including blockchain technology, is also becoming an important support for some liner companies to vigorously promote the "contactless delivery" business, simplify the process, and spare no effort to shorten the release time of goods to ensure that customer service is not affected.

In some routes with a large increase in cargo volume, some liner companies are also doing everything possible to solve the problem of export difficulties for domestic small and medium-sized enterprises. In September 2020, COSCO Ocean Shipping Co., Ltd. launched a special line for small and medium-sized customers on the Pacific route, providing transportation service products with cabin and container protection for small and medium-sized direct passengers, and innovatively proposed a freight rate mechanism linked with Shanghai container export index, which is open and transparent, and actively helps small and medium-sized enterprises reduce the risk of price fluctuation, and also simplifies the communication process of freight rates for small and medium-sized customers.

"The impact of the epidemic on the global industrial chain supply chain may gradually evolve from temporary and local to long-term and systematic." Zhang Shouguo, executive vice president of China Shipowners Association, said that the current difficulties faced by the global logistics supply chain require all parties to strengthen cooperation to solve the blocking points and difficulties from the source, so as to release the delayed transportation efficiency as soon as possible, so as to provide guarantee for the normal operation of International trade.

There is also deep meaning behind this crazy freight rate. "Behind the surge in China's foreign trade, it shows once again that on the basis of major strategic achievements in the fight against the epidemic, China has taken the lead in restoring the strong driving force of positive economic growth in major global economies, and shows the strong resilience of China's economy." Zhang Shouguo also said that this proves China's important position in the global supply chain and shows that the global supply chain can not be separated from China.

 

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