Spot container freight rates between China and the United States fell sharply due to manufacturing disruptions caused by China's National Day golden week and power shortages.
According to the data of digital freight forwarder shifl, from September to October, the freight rate between China and Los Angeles plummeted by $9000 per feu, a decrease of 51.4%. The company said spot prices on the trans Pacific trade route had fallen from a high of $17500 per feu to $8500.
According to shifl, spot prices on the China US east coast also fell over the same period, although they fell 28.2% in one month, from a high of $19000 / feu to $14000 / feu.
The sharp decline is due to the power failure caused by China's coal shortage and the impact on factory output. The first week of October is China's one-week golden week holiday, which is the traditional rest period of the shipping market, because manufacturers will close factories in these seven days.
Stifl shabsie levy, founder and CEO of the company, said that even if the freight is reduced, the production interruption may mean that it is difficult for them to find products to put into containers.
As the plight of China's manufacturing industry has triggered a new round of chaos, the lower spot price may only be short-lived. The spot price is still many times higher than the $1500 before the epidemic.
However, this temporary relief may soon be masked by a growing number of outstanding orders. China's novel coronavirus policy and novel coronavirus pneumonia shutdown are restraining factory output, which means that manufacturing orders in the US and EU can not be completed on time, "Shifl said. "As us and EU enterprises compete to diversify their supply chains, inventory shortages and price increases will become more obvious."
The xeneta shipping index (XSI) reveals another monthly rise in long-term shipping freight. The global container price rose by 3.2% in September, 2.2% in August and an unprecedented 28.1% in July, making the current freight rise by 91.5% compared with last year.
However, the freight rate benchmark and market intelligence platform xeneta pointed out that "there is little evidence that the market fundamentals are weak, which means that the carrier may face more pain and the carrier will make huge profits."
Patrick Berglund, chief executive of the Oslo based company, explained: "this year, COVID-19's destruction, port congestion, strong demand and overload capacity have been intertwined, which has contributed to a record growth rate." (Patrik Berglund)
He pointed out: "this is a crazy market", because the global supply chain is under great pressure. Shippers have no choice but to pay high prices before key trading periods such as Christmas to ensure safe delivery, or at least try to do so.
As a result, the vast majority of shipping companies benefited from high freight charges and increased container demand, reporting record financial results and strong forecasts for the next period.
Representative cases include: in the first half of the year, Herbert's profit increased nearly 10 times, and the EBITDA of Dafei CMA CGM soared in the second quarter. At the same time, Maersk recently revised its annual forecast and expected EBITDA to fall from $8.5 - 10.5 billion to $22 - 23 billion.
According to xeneta's analysis, shippers are trying new strategies to avoid unilateral negotiations and regain a sense of control. Several big companies such as IKEA and home depot are chartering their own ships to cope with supply chain difficulties and control soaring costs.
"This is a direct response to the speeding of the market, but someone wants to know whether this means a new way of working. In the long run, carriers are tired of being blackmailed," Berglund said.
However, for now, xeneta believes that the carrier seems to have controlled the situation, and the container throughput is expected to increase by 7-8%. So far, about 400 new container ships have been ordered in 2021.
According to the analysis platform, in this unstable situation, shipping companies are trying to increase freight rates by locking customers in longer-term contracts, hedging future revenue, and even providing multi-year agreements to obtain additional quantity options or the benefits of stable and guaranteed shipments.
CMA CGM has recently frozen the spot interest rate increase from now to February next year, which reflects another approach. "However, since freight rates are already so high, there is no doubt that many shippers will regard them as' bread crumbs on the table of the rich '," commented the CEO of xeneta, and questioned "whether the freeze will be implemented in the wider group of carriers."
The latest XSI report is based on crowdsourcing real-time rates of major shippers and provides regional market trend analysis of key transactions.
In particular, European imports increased by 3.9% in September, up 132.5% compared with the same period last year. Exports also increased by 1.3%, 51.7% over the same period last year.
As for the Far East, imports fell for the first time since March, but by only 0.7%. This still constitutes an increase of 49.8% over the previous year. The development of export index was more favorable, with an increase of 5.1%. In September, the benchmark rose 126.8% year-on-year, while it has risen 113.6% since the end of 2020.
In addition, US imports increased slightly by 0.6%, although the recent strong growth has increased the benchmark index by 67.3% year-on-year. Exports have also achieved the same growth, with the index rising by 20.7% (relatively mild) compared with the same period in 2020.
At the same time, key hub ports such as Los Angeles, long beach, New York and Hamburg are still seriously congested and equipment supply is insufficient. "In view of the strong demand before the festival and the high spot price, it is difficult for shippers to see much comfort," Berglund said and concluded. "The market situation is severe... It may be so for some time in the future."
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