Interface journalists| Liu Ting

May was the traditional slack season in the international shipping market, but this year the situation is somewhat abnormal. Since the end of April, the freight rates of Europe and America routes have generally increased in double digits, and some routes have soared nearly 50%. The situation of "one box is hard to find" has reappeared.

A number of industry insiders told InterfaceNews that this price rise is driven by the situation of the Red Sea, foreign trade enterprises' "scramble for exports", ship owners' price increases and other factors. It is expected that freight will still fluctuate at a high level in the short term, but the momentum for sustained and substantial growth is insufficient.

According to the data of Shanghai Shipping Exchange, the Shanghai export container freight index reported 2520.76 on May 17, up nearly 30% from April 26. In addition, as of May 13, the Shanghai export container settlement freight index for European routes (basic ports) was 2512.14 points, up 15.5% from April 29, and the U.S. - Spain routes (basic ports) was 2508.00 points, up 38.4% from April 29.

Source: Shanghai Shipping Exchange

Zhang Jie, Director of Marketing Department of Shanghai Hengtie International Logistics Co., Ltd., told InterfaceNews that the container freight rate rise started from South American routes and gradually extended to North American, West African and European routes.

He explained that BYD's large-scale production base complex located in Camali, Brazil, will be put into production in the second half of this year. This large-scale production base complex contains three factories, and at least 20000 containers need to be sent to South America in the short term, which leads to a phased shortage of market capacity. COSCO Shipping transferred some of the capacity of West Africa routes to support South American routes, which led to the general rise of freight rates of West Africa routes.

"The month on month increase of many routes even reached 40% - 50%. For example, the freight rate of a 40 foot container on the European route was about 4000 dollars in April, and it has risen to about 6000 dollars in May. Some routes are hard to find a container, so it is difficult for exporters to book an ideal shipping date." Zhang Jie said.

Zhong Zhechao, the founder and CEO of First Shipping, pointed out that this price rise could actually see some signs in mid April. The risk of spillover from the Palestinian Israeli conflict increased sharply last month, during which Iran detained a 15000 TEU large container ship. The Hussain armed forces also threatened to expand the scope of attack from the Red Sea to the Mediterranean Sea, which buried tension behind the price increase.

In the past six months, the situation of the Red Sea has been a major negative factor affecting the international shipping market. Hussai's armed attacks on merchant ships related to Israel and Britain and the United States in the Red Sea led to many ships bypassing the Cape of Good Hope in southern Africa, which increased the travel time and freight costs, and also led to the difficulty of timely container withdrawal, which to some extent broke the balance of the shipping market.

Zhong Zhechao also said that in previous years, the shipment volume of the international shipping market began to decline in the second week of May, but this year was very abnormal, and the price rise has continued so far. One reason is that the export enterprises represented by new energy vehicle enterprises "scramble for export".

The Brazilian government will resume the tariff exemption for Chinese new energy vehicles from July. Fan Bo, founder of Xi'an Hamburgerson Supply Chain Management Co., Ltd., told InterfaceNews that recently, orders from Chinese new energy vehicle enterprises to South America suddenly increased, which broke the market balance and pushed up the market price.

In addition, in October 2023, the European Commission will officially launch a countervailing investigation on Chinese electric vehicles. The investigation period is expected to last no more than 13 months. On May 14, the United States announced that it would further increase tariffs on electric vehicles, lithium batteries, photovoltaic cells and other products imported from China on the basis of the original 301 tariff. Among them, the import tariff of electric vehicles will be increased to 100%, and the tariff of photovoltaic panels and power batteries will be increased to 50% and 25% respectively.

Due to strong demand, many liner companies around the world have raised freight rates since the end of April. Maersk, the world's second largest liner company, announced that from May 6, all containers from mainland China, Hong Kong, China to Senegal, Guinea and other places will be charged with peak season surcharges, which are $1000 for small containers and $2000 for large containers.

MSC, the world's largest liner company, also relaunched the Diamond Tier implemented during the epidemic to ensure shipping space. The freight rate of a 40 foot container on the US West route is $8000, and that of the US East route is $10000. The guaranteed class freight rate of MSC is almost double the current market freight rate.

"Its logic is like scalpers' ticket scalping. I tell you that it is hard to get a position now. You can give me 10000 dollars and I will guarantee the cabinet for you. Although not many people may pay the bill, this kind of information just hanging there will cause great trouble to the psychological expectations of the market." Zhong Zhechao said.

Industry insiders pointed out that small and medium-sized export enterprises, such as cross-border e-commerce, have the biggest impact of the surge in freight rates. Because large companies have long-term contracts with ship owners, even if there is no contract, the ship owners will give priority to serving major customers when the transportation capacity is tight.

"For this price rise, practitioners in the entire export chain, including international freight forwarders, have a strong reaction, and they do not want the freight to rise." Fan Bo said that in the current external environment has become increasingly complex, foreign trade enterprises do not want to face the uncertainty of freight.

The last sharp rise in international shipping rates occurred during the COVID-19 epidemic. Since the second half of 2020, affected by the epidemic, the recovery rate of factories, ports and docks is low, and the export containers are scattered around the world. The return flow is not smooth, leading to the imbalance between supply and demand and pushing up freight rates. This situation will gradually improve until the middle of 2021.

Industry insiders believe that the rise in freight rates will not last too long and is expected to ease within three months.

"In view of the huge increase in the current round of major routes in Europe and the United States, which has nearly doubled, and with the end of the (off-season) suspension, the injection of new transport capacity by shipping companies, and the end of the short-term rush of electric vehicles, batteries and energy storage equipment, it is expected that there will be no market basis to continue to rise significantly in the future." Zhong Zhechao said.

Zhang Jie said that if there were no other "Black Swan" incidents, it was expected that the sea freight price would return to the normal level as soon as the end of July.