Recently, a sharp correction in sea freight rates between China and the United States has attracted market attention, down nearly $5000, or 22.25%, from a high of $20586 per FEU (40-foot container) on Sept. 10. Some shipping companies even said that the sea freight from Ningbo Port and Shanghai Port to the West Coast of the United States fell for three days and lost three months of increase!

The correction of shipping prices between China and the United States has brought dawn to many foreign trade small and medium-sized enterprises that have suffered from skyrocketing freight rates. Why is the freight rate between the United States and the West adjusted? How will the shipping price go in the future? A number of industry experts and practitioners told the Securities Times that the price correction is a normal phenomenon, with the cyclical reduction of orders, shipping capacity increased, shipping prices may gradually return to a rational level.

The freight rate of popular routes fell by 22%.

In recent years, the COVID-19 epidemic has disrupted the global shipping chain, and the terminals in many overseas countries are congested, resulting in high global shipping rates. Take the Sino-US route as an example, the route between China and the United States and the United States has increased from the usual US $5000 to US $22000, and many small and medium-sized foreign trade enterprises have complained incessantly, and the value of goods with low added value is not even worth the freight. Recently, shipping prices on some routes, such as China and the United States, have been revised back, but they are still high compared with those before the epidemic.

Recently, the Baltic Sea Shipping Index (FBX) data show that the global container freight index has fallen from $11109 on Sept. 10 to $9949 on Oct. 8.

Among them, the biggest decline was the popular route China / East Asia-US West, where the price of the index has fallen for four consecutive weeks, falling from $20586 / FEU on Sept. 10 to $16004 / FEU on Oct. 8, down nearly $5000, or 22.25%.

The reporter saw in an international logistics exchange group that on October 11, the latest quotation even showed that the freight from Shenzhen / Yantian Port to Los Angeles / long Beach Port in the United States had dropped to 8300 US dollars, which was directly halved compared with the Baltic Freight Index (FBX). However, some industry insiders said that the emergence of significantly lower than the market price, may be a temporary adjustment of the position, may also be scalpers selling cabinets to depress prices.

What is the main reason behind the sharp drop in freight rates on American Line? Zhong Zhe-Chao, founder and CEO of a shipping company, told reporters that the increase in overtime shipping capacity, the superposition of the National Day Golden week holiday, and the unexpected pull-off power surge in the industry, the three forces collided together, and the US-West route plummeted without a little bit of precaution, and this wave caught many scalpers hoarding space by surprise.

Zhong Zhe-Chao believes that the decline in freight rates between the United States and the West is a good thing for the entire shipping market. The collapse in prices makes everyone feel the ruthlessness of the market, and freight rates will certainly fall sharply if they soar. In addition, the slump also shows once again that the affairs of the market have to be solved in the end.

Wang Guowen, director of the Institute of Logistics and supply chain Management of China (Shenzhen) Comprehensive Development Research Institute, told reporters that shipping prices have been revised back recently, but they are still high, putting great pressure on global trade and consumer costs. From the supply side, from last year to the present, international transport capacity has been increasing, which will effectively alleviate the shortage of shipping space.

However, Wang Guowen believes that it is difficult to conclude that power cuts are the cause of the decline in freight rates, and that power cuts have less impact on enterprises in the Pearl River Delta region, while the Pearl River Delta and the Yangtze River Delta are places of concentration of foreign trade, and whether foreign trade orders decrease or not depends on the export data of September and October.Judging from the trend over the years, the peak period of foreign trade orders has passed. Some time ago, malignant replenishment and Christmas inventory. July, August and September are the peak periods of orders, which are basically over by October. This is a normal seasonal cycle response, not necessarily the direct result of power cuts.

The reporter noted that not all routes' freight rates have fallen. Data from the Shanghai Shipping Exchange show that as of October 8, China's export container freight composite index rose 1.6% from the previous period, with the highest increase of 8.6% for Southeast Asian routes and 7.0% for US-East routes. Among them, the US-West route, the Mediterranean route and South Africa route fell 3.7%, 1.6% and 1.1% respectively.

"recently, when our two freezers went to Brazil, the freight was nearly 4000 US dollars cheaper. The route from China to Europe has not dropped obviously, so the goods will be delivered in accordance with normal needs. The person in charge of a domestic foreign trade company introduced it to the reporter. Similarly, freight rates for routes from China to Africa remain relatively stable and have not fallen.

Will sea freight rates continue to be adjusted in the future?

According to the market point of view, the correction of freight rates on popular routes indicates that the peak of shipping rates is approaching.

China International Capital Corporation research newspaper pointed out that recently, Flyship announced that it would stop raising spot freight rates from September to February next year, while the traditional peak season in the fourth quarter gradually ended. China International Capital Corporation believes that the peak of freight rates may be approaching. It may still take 1-2 quarters to fully digest the accumulated volume in the current supply chain nodes, so the industry may return to normalization or in the first to third quarters of 2022. If the double-limit policy has a material impact on production activities and shipments, it may accelerate the inflection point.

On the other hand, China International Capital Corporation believes that the security and reliability requirements of the supply chain may prompt more head customers to sign long-term freight rates, and the acceptance of freight rates will also be higher than that before the epidemic.

What price will the shipping price of the United States and West be adjusted back to? Bu Yicun, senior product manager of Suida non-Logistics Co., Ltd., believes that it is difficult to determine whether the current freight rate trend is a short-term correction or a long-term downturn, and the internal cause of the logistics industry is the key factor of price fluctuations.

Buyi Village said that the current "Golden Nine Silver Ten" period, especially after the recovery of domestic power shortage, the factory will work overtime to ship goods. According to the previous practice, it is the peak season to prepare goods from the end of each year to the Spring Festival, and some factories may increase their orders, and sea freight rates will rise accordingly. Although seaborne prices have fallen in recent weeks, they are still high compared with those before the epidemic. Judging from the long-term trend, it is still difficult to determine whether the recent adjustment is short-term volatility. At present, the epidemic in the United States is still serious, the operational efficiency of ports has not improved, and the fundamentals have not changed.

Zhong Zhe-Chao also said that the market trend after National Day depends on two major factors, first of all, the congestion of container ships in long Beach and Los Angeles in the United States, and in the two major port areas of Shanghai and Ningbo in China. If there is a big relief and improvement, it is difficult for the freight between the United States and the West to rebound in the short term. More importantly, the duration of the current surge is unknown, and if it lasts for a long time, including Europe and other routes may also be affected.

Wang Guowen told reporters that the periodicity of the recovery of maritime capacity is relatively long, and the price elasticity is not obvious. In other markets, once the price rises, the supply will rise greatly and the price will fall. There used to be a view in the shipping community that prices would fall in mid-2021, but now there are 200000 fewer crew members worldwide. In addition, the loading and unloading capacity of the port has also reached its limit, the shortage of trailer drivers and the lack of supporting transport capacity in the rear are all because the epidemic has affected the turnover efficiency.

"in the extremely difficult recovery of the global economy, we can only be relatively optimistic, and repeated outbreaks in the future will have an impact on the economy. In the cycle of sustained recovery, the irrational rise in international shipping prices will not last long. Wang Guowen told reporters.

It is undeniable that high shipping prices have squeezed corporate profits, which has had a negative impact on many industries.

Recently, the official Weibo of the China Home Appliances Association said in an article that recent quotations from several freight forwarders showed that the shipping price of Meissen had been adjusted to a certain extent before the festival. it is mainly affected by the recent strict supervision of the shipping market, power restrictions and National Day short holiday.

Looking forward to the fourth quarter, on the one hand, the situation of international port congestion and capacity tension has not been alleviated; on the other hand, with the approach of the Christmas holiday, demand from Europe and the United States is still growing, and there is a good chance that shipping prices will still be high.

At present, there is a serious imbalance between global maritime supply and demand, and there are still no obvious signs of relief in the difficult situation of one cabinet. Global trade and transportation is not smooth, which greatly interferes with the rhythm of orders and shipments of enterprise customers, and the backlog of enterprise inventory is serious. Costs have risen sharply, and profitability has declined significantly.

In the follow-up, as the overseas epidemic gradually improves and the prevention and control measures are gradually relaxed, some orders that have previously returned to China are also likely to return to overseas, especially in Southeast Asia.

Wang Guowen believes that the difficulty for small and medium-sized enterprises is that they do not sign long-term orders with shipping companies to lock prices, grabbing timely orders, which account for a low proportion of shipping orders, but are fatal to small and medium-sized enterprises.

"for example, they only have one or two boxes of goods, and as a result, a box of goods will have to pay high freight, which can not be solved in a short period of time. Under the circumstances of high freight rates, it is a difficult time for shippers. Domestic small and medium-sized enterprises need to adjust their strategies when accepting orders, not just to take orders. Try to choose high value-added products that can properly offset the proportion of freight to the value of goods. "

"in the past few years, I have observed a phenomenon that the value of containers in China is increasing, that is to say, the gold content made in China is increasing, and more and more high value-added products are exported. Yantian Port used to export a lot of low value-added plastic slippers and clothing, but now it exports more high-end electronic products. Wang Guowen said.

Wang Guowen believes that from a rational point of view, the freight rate of more than 20,000 US dollars from China to the United States is not normal in itself.After the Spring Festival next year, freight rates will continue to return to normal prices, and the recent price drop is precisely a foreseeable phenomenon. Next year's sea freight rate correction is a definite trend.