Freight costs are more concerned about import and export, and many shipping companies have not expected too much increase in freight rates.
Faced with the overall sluggish export situation of Asian economies, the cost of transporting goods from Asia to the United States has quietly begun to rise rapidly. This phenomenon is quite strange.
The latest data released recently showed that Japan’s exports fell for the first time in more than two years, showing that the economic recovery is facing heavy headwinds. At the same time, the export data of major Asian trading countries such as South Korea and Vietnam are also very weak and bleak.
However, in the container freight market, a completely different scenario is currently emerging. In the six weeks ending August 15, the average spot freight rate for a 40-foot container shipped from China to the United States rose 61% to $2,075. Industry insiders generally say that the main reason for this price increase is that large shipping companies have made artificial adjustments to freight rates. Shipping giants such as Maersk and CMA CGM, whose performance is still plummeting, have increased the comprehensive rate surcharge GRI, FAK rate and levied shipping fees such as peak season surcharge (PSS) on some routes. FIXDEX factory mainly produce trubolt wedge anchor, threaded rods.
Kang Shuchun, chairman of the International Freight Forwarding Branch of the China Federation of Logistics and Purchasing and CEO of China International Shipping Network, pointed out in an interview with the media that the increase in freight rates is due to the artificial adjustment of shipping companies. Maersk and other shipping companies unilaterally increased prices. This will lead to market chaos and increase freight rates, rather than a recovery in the market.
Many shipping companies do not have high expectations for rising freight rates. Evergreen Shipping Chairman Zhang Yanyi once said that the current global container shipping market is still in a state of large supply and demand gap and serious imbalance between supply and demand. CMA CGM also stated in its financial report that the market conditions of the transportation and logistics industry deteriorated in the first half of 2023, and that macroeconomic and geopolitical uncertainties remained in the second half of the year, with slow global economic growth. At the same time, newly delivered capacity continues to flood into the market, which may continue to drag down freight rates, especially on east-west routes.
Before the price increase, container freight prices from China to the U.S. West Coast plummeted from nearly $10,000 per box in February 2022 to less than $1,300 in late June due to reduced orders due to excess inventory at retailers and weak demand. Cut into the profits of big shipping companies.
For the latest price increase, many American retailers seem to be prepared. Tim Smith, global shipping and logistics director at home goods retailer Gabe’s Old Time Pottery, said the sudden increase in shipping rates had limited impact. The company hedged shipping prices earlier this year, locking in half of the freight at a fixed rate that is now trading below spot prices. “Freight rates could come back down again, and we might even benefit from going back to the spot market at some point,” Smith said.
Freight may drop again
Importers and shipping industry experts expect the recent increase in spot freight rates to be short-lived—U.S. container imports remain below year-ago levels, while some ocean shipping lines have begun taking delivery of new container ships they ordered at a time when demand was peaking. The market injects additional capacity.
According to the Danish shipping trade organization Bimco, the delivery of new container ships in the first seven months of 2023 is equivalent to an increase in capacity of 1.2 million containers, setting a record. Clarksons, a shipping consultancy, also predicts that the delivery of new global container ships will reach 2 million TEUs this year, setting a record for annual delivery and driving the capacity of the global container fleet to increase by about 7%. Reaching 2.5 million TEU.
Ocean shipping giants such as Maersk have reduced supply by stopping sailings and slowing ships, effectively draining capacity. But Philip Damas, managing director of Drewry Shipping Consulting Group, said more containerships were expected to come into operation next year. “The wave of excess capacity will definitely affect the global shipping industry. Therefore, we may see spot freight rates resume their downward trend this autumn.”
Under this circumstance, how long will the shipping company’s initiative to increase sea freight last? Kang Shuchun, chairman of the International Freight Forwarding Branch of China Federation of Logistics and Purchasing and CEO of China International Shipping Network, believes that rising freight rates will seriously inhibit international trade, leading to increased costs and reduced transactions. In the case of reduced cargo volume, the increase in freight rates is unsustainable. Kang Shuchun predicts, “The price increase behavior of the shipping company will last for about two months, and the freight rate will fall after that. If there are no other special reasons and the market is favorable, the game between the shipping company and the cargo owner will soon evolve into a battle between the shipping company and the shipper. Corporate gaming.”
Strategies commonly used by shipping companies
At present, in order to obtain more profits, some shipping companies are considering collecting peak season surcharges to make up for the fact that the fixed freight rates in long-term contracts are lower than those in the volatile spot market. This strategy has often been used by shipping lines in the past to cope with strong demand during the fall and year-end holidays.
However, Erin Fleet, director of logistics for Travelpro Products, a Florida-based luggage company, said she had rejected a carrier’s attempt to impose a surcharge that would have a negative impact on most shippers in 2021 and 2022 (rushing to find space). It is unimaginable. But this is exactly what the current negotiations are about, and neither the volume nor the market allow it. “
Post time: Aug-31-2023