For the owners of oil tankers and dry bulk carriers, this is a painful period. But there are also some bright spots in the haze of the maritime industry-not only the container industry is booming, but the freight rate of liquefied petroleum gas (LPG) has just reached the highest point in 5 years.
Last Friday, the Baltic Exchange assessed the freight of a very large gas carrier (VLGC, an LPG carrier with a capacity of approximately 84,000 cubic meters) at US$104,000 per day. This figure has risen from a low of less than $20,000 per day in July.
Last Wednesday, Argus carried out a higher assessment of VLGC freight rates on the Middle East-Asia route: US$107,000 per day.
Chart: Kofyin; until December 10
The stocks of VLGC owners are rising. In the past six months, the two Norwegian companies Avance Gas (Oslo: AGAS) and BW LPG (Oslo: BWLPG) have grown by 110% and 88%, respectively. Dorian LPG (NYSE: LPG), which is listed in the United States, is lagging, although it has grown by 44% during this period.
Chart: Fernley Securities
In order to gain insight into the factors that led to the increase in VLGC freight rates and whether the freight rebound has an impact , FreightWaves interviewed Scott Gray, an LPG freight broker located in Texas.
Gray is known in the industry as one of the co-founders of Waterborne Reports, a well-respected natural gas transportation intelligence company that was subsequently acquired by IHS Markit (NYSE:INFO).
U.S. exports unexpectedly rise
LPG (propane and butane) is produced through oil and gas production and refining processes. When the impact of the epidemic cut consumption in the first half of the year and oil prices plummeted, people worried that LPG transportation would be a terrible situation.
Theoretically, the lower U.S. production combined with the sharp decline in refinery output will reduce U.S. LPG exports. There are two main factors affecting VLGC freight: US-Asia and Middle East-Asia traffic. As the U.S.-Asia voyage is longer, the rate is more important. Therefore, U.S. LPG exports restricted by the epidemic will limit the spot price of VLGC.
But the facts have proved that concerns about US exports are unfounded.
Gray explained: "I want to say that the U.S. water LPG exports have not been affected by various sporadic events in the first and second quarters. If you look at the export graph, the graph will fluctuate, but it has a downward trend. Not big. In fact, I can even say that the average in the fourth quarter is better than the previous three quarters. We see 80, 82, 84 VLGC loading every month. I think this is a powerful system."
Gray said that unlike LPG in the Middle East (more from the refining process), LPG in the United States is produced through natural gas production. After the new crown epidemic, natural gas production has performed better than oil production and refining.
In BW LPG's latest quarterly conference call, CEO Anders Onarheim said: "Despite the decline in oil production, the U.S. LPG production has increased." Executive Vice President of Business, BW LPG Niels Rigault added: “The production of LPG in the US has proven to be more resilient in a low-price environment.”
Far East demand is very strong
VLGC's listed companies have highlighted the strong demand for Asia from China, Japan and South Korea in recent months. In Asia, propane is used for heating and cooking and plastic production.
On the industrial side, LPG is consumed by propane dehydrogenation (PDH) plants. Some PDH plants only use propane as a raw material; others choose to use propane or naphtha based on price. In layman's terms, the propylene produced by the PDH plant is the precursor of polypropylene, and propylene is the precursor of plastic.
Considering the plastic packaging of all commodities used after the epidemic, the price of propylene is soaring. What followed was the pricing of propane in China. The value of propylene is at or close to a record level.
The greater the spread between US propane and Chinese propane, the higher the transportation cost, while still providing shippers with acceptable sales margins.
"This (Asian) demand keeps prices high. Gray said that when the price difference (priced with the United States) increases, the shipping industry will step in and get a share of the pie, which is why freight rates are now rising sharply.
Middle East exports and India imports
The transportation needs of LPG must be considered in conjunction with the export situation of the Middle East and the United States.
Due to the impact of the epidemic that has led to OPEC production cuts and refineries, the impact of COVID on Middle East exports is greater than US exports.
Gray confirmed: “Due to reduced refinery operations, production in the Middle East has decreased. Iran’s transaction volume has also declined. In January, Iran’s production was approximately 575,000 tons. In November it was 250,000 tons.”
A key development in global shipping demand is the increase in India's imports of American LPG, rather than imports from the Middle East.
Rigault said: “India started importing from the United States last year. The duration of the voyage is more than four times the duration of the Middle East voyage. India mainly buys LPG from the Middle East. But they also see the US price, so they can also buy American products.”
Gray is skeptical of the US-India trade that started in early 2019. "This is considered a new thing. A new route. But the Middle East market seems to have taken back part of it. They said'Don't be in my backyard' because it is next door. It is difficult for the United States to compete with long-distance freight in the Middle East on the basis of However, the Middle East can ship it to the United States. In addition, Indians also have contracts in the Middle East. For us, this is more opportunity."
Canal and dry dock supply restrictions
The two main constraints on ship supply: the congestion of the Panama Canal and the maintenance and modification of dry docks for LPG ships are also increasing freight rates.
As previously reported by FreightWaves, in the past two months, the speed of ships without transit reservations through the Panama Canal has slowed. Gray said: "We have seen that due to delays, the volume of shipments from the United States to Asia via the Cape of Good Hope has increased, which has led to an increase in freight rates."
The most important ship supply issue involves dry docks.
He pointed out: “There are currently 25-30 LPG ships in dry docks in Asia in need of repairs. I think about five years ago: all the newbuildings came in. Now, after five years, it’s like you bought one. The car must be brought in, and the boat must be maintained. All these people will go to the yard at the same time, thus tightening the market."
Outlook for the first quarter of 2021
How long can VLGC freight rate maintain the current high point?
In terms of dry dock, the freight tailwind will continue. Gray said: "In the first quarter, there were almost as many ships in dry dock as in the fourth quarter." According to Rigault, "23% of the global VLGC fleet will enter the dock next year."
In terms of freight, the volume in the Middle East may increase. OPEC plans to cut production in January. Gray certainly said: "It will have an impact at some point."
At the same time, Biden will assume the presidency on January 20. It is expected that Biden's attitude towards Iran will not be as tough as Trump. This may eventually increase Iran’s LPG exports.
The biggest unknown is the arbitrage spread between China and the US LPG, which will determine the volume of transactions on this long-distance route.
In terms of weather, if the weather in the United States is cold, the domestic demand for LPG heating will increase, but the warm weather in North Asia will reduce the demand, the price difference will be reduced, and the goods will be reduced. vice versa.
As my country's foreign trade exports gradually stabilized and improved, the lack of domestic export capacity has appeared in many places, and for a period of time, it has also been accompanied by a shortage of containers.
Recently, a 1℃ reporter from China Business News found that the main reason for the “difficult to find one container” situation was that due to the epidemic, the efficiency of container turnover was reduced, and the port congestion caused a large number of delays in shipping schedules, which further aggravated the return of containers. smooth. With the efforts of domestic container manufacturers in recent months, the shortage of domestic containers has improved, and the shortage of some ports has eased.
However, new container manufacturers dare not continue to expand production capacity. Because of the epidemic, market uncertainty continues.
According to the 1℃ reporter's further on-site investigation, the shortage of containers has stimulated the kinetic energy of new container construction in China, and the prices of raw materials and labor have risen. The ex-factory price of new containers will rise accordingly. For the high freight rates, it is the foreign trade companies that ultimately suffer the loss of profits.
Inefficient port congestion
On the afternoon of December 2, when the 1℃ reporter arrived at Shenzhen Yantian International Container Terminal, the containers were piled up like a mountain, and heavy semi-trailer trucks entered and exited in file at the gate: the first class trucks were fully loaded with the containers that were about to be exported and went through automatic inspection. The passage enters the terminal, and the other type is an empty truck, which enters the gate and exits after the airspace cabinet. Many large trucks are still lining up to pick up the containers.
Chinese exports with a major source of container in two aspects, one is emptying the old container port after unloading , the second is Chinese-made box business of new office box . According to statistics from China Container Industry Association, usually the storage size of empty containers at ports is about 4 million TEU (Twenty-feet Equivalent Unit, the international standard unit, a container with a length of 20 feet is the international unit of measurement), and the port unloads old containers. It is the main source of supply for export boxes in my country.
We have not yet seen data on how many empty containers are available in the yards of domestic ports such as Yantian Port, but statistics from the China Container Industry Association show that since this year, China’s major foreign trade container ports have unloaded old container stocks with export growth and overseas adjustments. Due to restrictions on the return of empty containers and other factors, the unloaded old container stock of the seven major foreign trade container ports continued to decrease from about 3.05 million TEU at the end of February 2020 to about 1.85 million TEU at the end of October, compared with the same period in the past five years A reduction of 26%.
Photo: Yantian International Container Terminal is located in Dapeng Bay, east of Shenzhen. Photo/Wu Mianqiang
At present, domestic export containers are still very tight. In addition to the fact that container transportation has broken the original arrival and delivery balance level, the decline in container circulation speed and port congestion are also one of the main reasons.
As the "barometer" of global trade, containers have a complete set of operating procedures. According to people in the shipping industry, taking shipping as an example, the port terminal is a transfer station for containers. Export companies book space and containers from the freight forwarder. After passing through the export customs broker, the trailer fleet consisting of semi-trailers goes to the terminal and other yards to pick up containers After the container is filled with cargo, it is sent to the port terminal for export. After the liner arrives at the destination port with the container, the local cargo owner arranges customs clearance, picking up the container, unloading, and returning the container to the terminal yard. After waiting for the local export company to book, pick up the container and load the cargo, the container will be transferred back to China by liner.
However, the lingering epidemic has affected the efficiency of the above-mentioned container operations. Overseas epidemics have repeated, and the efficiency of local cargo owners in customs clearance, container picking and unloading is low. The relevant person in charge of the Guangdong small appliance export company previously interviewed by the 1℃ reporter said that their company's goods are in the ports of European and American countries .
Affected by the epidemic, many countries have experienced labor shortages, especially port operators, trailer truck drivers and related logistics personnel.
Master Sun, a truck driver picking up cargo at the Shenzhen container yard, told the 1℃ reporter that the company’s overseas business divisions had a "labor shortage". The United States had just finished Thanksgiving and will enter the Christmas season, which will further increase labor. tension.
The China Container Industry Association recently issued an "Action Initiative for Enterprises in the Container Industry Chain to Work Together to Stabilize Foreign Trade and Promote Growth", which stated that "Due to the increase in the number of infected people and the requirements of epidemic prevention measures, shippers (from across the ocean) cannot normally get from ports. The goods are shipped out of the cargo yard, and some goods are even rejected after arriving at the port. This has caused more and more containers to be piled up in disorder at the port. This disordered storage has caused the shipping company’s ships to be unable to dock and offshore on schedule. Affected the turnover efficiency of containers."
"From a global perspective, the supply chain of container transportation has slowed down. This is also one of the important factors that have caused global container tension." said Zhao, who has been in the shipping industry for more than ten years. Therefore, ports are definitely better than Congestion in the past was inevitable.
The prevention and control of the epidemic has also reduced the efficiency of domestic container operations. Lao Zhao recently told reporters at 1℃ that after the liner arrived at the domestic port, compared with the non-epidemic period, the quarantine process and procedures have increased. For example, the container needs to be disinfected, which leads to a longer time for customs clearance and unloading. "The crew cannot go ashore. It needs to be isolated and rotated first."
Port congestion will lead to adjustments in shipping schedules and affect the efficiency of container transportation. Since the third quarter of this year, the Ocean Network Express (ONE) of the TA Alliance has continued to update the schedule adjustment notice on its official website. The reporter at 1℃ found that most of the reasons were caused by port congestion.
From December 1st to 4th, ONE continuously issued more than 20 notices regarding the Shanghai Port shipping schedule changes or late opening notices, mostly due to "the effect of port congestion causing delays in shipping schedules." In the past November, there were more cases of ship delays due to port congestion. ONE is a Japanese container shipping company headquartered in Tokyo and Singapore. It was established as a joint venture by a Japanese shipping company in 2016, with a fleet of over one million TEUs.
"Once there is congestion in the port, the operation efficiency of containers will be low, which will further aggravate the tension of container use." Lao Zhao said.
As the international container ocean trunk transportation hub port in South China, Yantian Port is one of the world's largest single-handle container terminals. It mainly serves routes exported to Europe and the United States. Nearly 100 liner routes reach Europe, the United States and other regions every week. The 1℃ reporter found on the scene that the port was busy, and the gates were still slightly crowded. Many large trucks stopped at the door and waited for the relevant procedures to be completed, while the large trucks that had already lifted their cabinets slowly pulled out of the cracks.
Cost rises, logistics prices soar
The shortage of domestic export containers has caused the single-container market price to soar. As the order volume of container manufacturers increases, the cost of raw materials and labor has increased. In addition, the shortage of shipping space has further increased the cost of export containers for enterprises, increasing the logistics cost of the foreign trade industry and eroding the profits of export enterprises.
In fact, more than 90% of global containers are currently supplied by Chinese companies. According to the research report of Dongxing Securities, on the container production side, CIMC (CIMC, market share of 44%), Shanghai Universe (DFIC, market share of about 24%), and Xinhuachang (CXIC, market share About 13%), Singamas (about 3% market share) occupy most of the market share.
According to data released by the China Container Industry Association, there are three main types of container buyers. One is shipping companies, the other is container leasing companies, and the third is domestic railway and logistics companies . The third category accounts for a very low proportion, not exceeding all. 8% of annual container production and sales. The total production and sales of China's container manufacturers are between 2 million and 3 million TEU each year, and the storage of new containers accounts for 10%-20%.
1℃ reporters interviewed shipping companies and container manufacturing companies in many ways and learned that in the first five months of this year, China’s container manufacturers had almost no new orders. The pessimistic judgment of China has reduced liner shipping capacity and container procurement plans.
However, after June this year, my country's foreign trade quickly recovered. After the empty containers at the port were digested, the information of the lack of containers in the market was transmitted to the container manufacturers in mid-July, and orders continued to increase. "In September, our order volume has been scheduled to March next year." A person from CIMC Group who did not want to be named told 1℃ reporter.
"As a container equipment provider, we mainly produce according to shipping company orders. The shipping industry is currently booming and freight prices are rising. Therefore, shipowners and container leasing companies are also willing to purchase large quantities of containers." Liu Meng, a senior employee of a major domestic container manufacturer (Pseudonym) said.
Continued hot container production orders have caused the price of raw materials in the container supply chain to rise, including raw materials required for container production such as steel, wooden floors, and paint.
Insiders of Singamas Containers told 1℃ reporters that according to their understanding, steel, wood floors, and paint have all increased in varying degrees since the beginning of this year. "Compared with the off-season in the first half of this year, the price of steel has increased by about 10%, and the current average is more than 4,000 yuan per ton, and the wood floor has increased by 50% year-on-year." A relevant person in charge of a container manufacturer told 1℃ reporter.
The number of container floor sales is consistent with the trend of China's container export volume. In the raw material sector, the shortage of wood flooring is the most obvious, so prices have also increased significantly.
Kangxin New Material (600076.SH) is the only listed company in China that is mainly engaged in container floor panels. The company’s securities department confirmed that its finished product prices this year have exceeded the same period last year, "because of the increase in raw material and labor costs."
The main raw material of the container floor is logs. A domestic container bottom plate supplier told the 1℃ reporter that the current price of wood has increased significantly, and the purchase price of better poplar wood ranges from 800 to 1,000 yuan, which is more than 50% higher than when the market was normal. In the case of shortage, if the price is not increased, the timber merchant will not deliver the goods to the transaction."
The increase in supply chain costs has also driven up the selling prices of container products . A few days ago, a reporter from 1℃ asked CIMC insiders about the order status in the name of the leasing company. The salesperson of the other party said, “Orders are very slow now, and they need to wait until March next year to deliver them, mainly now (production orders). Don't go in."
The above-mentioned sales staff stated that the current order volume of the company is mainly unified at the head office level. “The selling price of 20-foot container (standard box) is now US$2,600, 40-foot container (high container) is US$4420, and 40-foot container (flat container) is 4210. Around the dollar."
Compared with last year, the price of new boxes between US$1600 and US$1700 has increased significantly. According to the research report of Dongxing Securities, in August this year, the price of a new container was only US$2,100.
"The epidemic is a double-edged sword, both an opportunity and a challenge." Recently, Lao Zhao said. Most of the foreign trade companies that have survived now have received many foreign orders, but at the same time they have encountered high freight costs caused by the shortage of containers and the shortage of space.
"Many of our company's customers, currently doing foreign trade orders, are not making enough money to pay for sea freight. Examples of this are everywhere. Even if they lose money, they still do it because they have a long-term vision and want to maintain good customers first. In the future, the freight rate will be lowered and then the profits will be made back." A business executive who has been a freight forwarder in East China for 10 years told 1℃ reporter.
I dare not rush to expand production after receiving orders in the first quarter of next year
On the evening of December 2, a 1℃ reporter came to the container production workshop of Dongguan South CIMC Logistics Equipment Manufacturing Co., Ltd. (hereinafter referred to as "South CIMC"), a subsidiary of CIMC Group, Fenggang Town, Dongguan City. A scene in full swing.
This is one of the largest container production bases in the country, and it is said that 1 out of every 10 containers in the world goes to sea here.
Worker Master Wang (pseudonym) had just left work and was riding a battery car to go home. He told the 1℃ reporter that the factory orders are currently full and he worked 11 hours that day. "Our factory is now operating in two shifts and is producing at full capacity," a person close to Southern CIMC told 1℃ reporter.
Since the third quarter of this year, as CIMC's order volume continues to increase, Master Wang has many colleagues who come to help temporarily. The 1℃ reporter learned during an interview with Southern CIMC that the plant has added many new temporary workers this year. “Most of them are labor dispatch employees, and the average daily salary of each person is 300 yuan, which is tens of thousands of yuan a month.” A labor dispatch company who recruited welders in a container factory of CIMC Group introduced.
"The main reason is that the container manufacturing industry is deeply affected by the shipping industry. When the market is good, the number of orders will increase, and if the production is at full capacity, there will be a shortage of manpower; when the market is not good, the number of orders will decrease, and manpower will be sufficient or even surplus. "The above-mentioned CIMC insider told the 1℃ reporter that many CIMC people (employees) still have fresh memories of the experience that factories were shut down during the financial crisis in 2008 and that they were looking forward to working at home.
On December 3, regarding the current shortage of containers and soaring freight rates in the field of foreign trade and logistics, the spokesperson of the Ministry of Commerce Gao Feng said that on the basis of the preliminary work, the Ministry of Commerce will continue to promote the increase of capacity and support the acceleration Container return transportation, improve operation efficiency, support container manufacturing enterprises to expand production capacity, and at the same time increase the intensity of market supervision, strive to stabilize market prices, and provide strong logistics support for the stable development of foreign trade.
Recently, the China Container Industry Association has also issued an initiative to "advocate container industry chain enterprises to actively invest in stabilizing foreign trade", and strive to improve the efficiency of international container turnover. Production-related enterprises should continue to improve production efficiency, continue to tap potential production capacity, and improve process equipment. Increase the number of workers, improve their labor skills, and make every effort to ensure that new box orders are delivered as soon as possible.
Affected by the current shipping situation, many large domestic container manufacturing companies are making every effort to ensure the delivery of new container orders as soon as possible to escort foreign trade exports, while also considering the future balance of supply and demand in the global container market.
In fact, the container manufacturing and sales industry and the development of the shipping industry share each other. Nowadays, aspects of container production enterprises are operating at full capacity ensure market supply; on the other hand below the epidemic, we still dare to expand production capacity.
People in the shipping industry predict that the shortage of containers will continue until the first quarter of 2021. Therefore, there are already large domestic container companies that dare not rush to take orders for the second quarter of next year.
"The main reason is that I dare not judge the future market prospects." Liu Meng told the 1℃ reporter that the current epidemic situation continues and container manufacturers are also worried that after receiving external orders, they cannot judge the future market development. If the order is received first next year Quarterly, the supply can be guaranteed, and the market will not be turbulent at the same time, so everyone hopes to have such a steady move.
"Now that the market is in short supply, we can completely launch capacity projects, purchase equipment, and let workers work overtime to produce, but in the long run, this will break the balance of supply and demand in the global container market." Liu Meng said that the demand for containers in global trade is only There are several million TEUs, once container overcapacity occurs, it will be a serious problem.
The current life span of containers is 10-15 years. "After the rapid one-time release of production capacity, what about next year or the next year? The development of the industrial chain still requires a long stream of water." Liu Meng told the 1℃ reporter.
Near the end of the year, the peak freight season continued to be hot, and the market freight rates continued to rise.
Especially in the European market, the demand for cargo volume remains high. At the same time, the recurrence of the new crown pneumonia epidemic has also stimulated the growth of local import demand.
At present, the average space utilization rate of ships exported from Shanghai Port to Europe has basically remained at the full space level, driving the market booking price to rise sharply.
The latest Shanghai comprehensive export container freight index
According to the Shanghai Composite Container Freight Index (SCFI), on December 11, the freight rate (sea freight and ocean freight surcharges) from Shanghai to the European basic port market was US$2,948/TEU, a 24.2% increase from a week ago. Compared with the US$1,508/TEU a month ago, it has nearly doubled.
The freight rate of US$2948/TEU on the Asia-Europe route is the highest level in history since SCFI was released in 2009.
2018-2020 SCFI Asia-Europe route freight trends
The rate of the Mediterranean route has increased even more. On December 11, the freight rate (sea and ocean surcharges) for exports from Shanghai to the Mediterranean basic port market was 3073 US dollars/TEU, a 28.9% increase from a week ago.
Some industry analysts believe that the actual freight rate of some goods on the Asia-Europe route is higher.
Lars Jensen, CEO of SeaIntelligence Consulting, an industry authoritative consulting firm, believes that SCFI may seriously underestimate the actual freight rate in some cases because it does not consider the additional costs associated with containers and spaces.
He said that anecdotal evidence has shown that in Asia-Europe routes, the actual freight rate of some goods has reached as high as US$10,000/FEU.
The continuous period of high cargo volume, soaring freight rates, port congestion and shortage of containers have increased the risk of supply chain rupture, and more and more liner companies are controlling bookings.
Hapag-Lloyd has announced that due to severe container shortages, until the end of December this year, it will no longer accept 40-foot reefer containers from terminals in Germany, Austria, Switzerland, Hungary and the Czech Republic. In addition, the empty container of 40-foot ordinary container in Hamburg, Germany is not accepted.
This means that bookings in these countries will be affected.
In addition, Maersk and ONE also indicated to the media that before the New Year, they will have to reduce their bookings in Asia.
Faced with criticism that liner companies’ reduced bookings will affect shippers’ shipments, the World Shipping Council, headquartered in the United States, stated: “No one can predict the surge in demand for container shipping this year. see."
The organization believes that the solution to current problems lies in continuous communication between the carrier and the shipper. To restore the entire transportation system to a balanced state, all parties must work together to spend this critical period together.
Air cargo has ushered in the traditional peak season again. Not only has the volume of cargo increased sharply, but also the phenomenon of warehouse explosions and queues. The air freight prices of some routes have also increased or even doubled.
Katie Griley, vice president of operations at Griley Air Freight, revealed that the peak season is coming. Even if the cargo arrives at the local airport, it will take 4 to 8 hours for truck drivers to pick up the cargo from Los Angeles International Airport.
In this regard, the International Air Cargo Association (IATA) stated that during the surge in e-commerce in recent months, the continuous shortage of capacity due to the lack of passenger aircraft services will cause a particularly serious blow to the air cargo industry.
So what is the current domestic situation?
An executive vice president of international freight in Shanghai said that it is now in the traditional peak season for air transportation, and the recent traffic jams and queues in the unloading area of the airport logistics storage area are very serious. The liquidation should start in mid-October, and not only the volume of cargo has increased significantly, but the freight prices of major routes have also increased a lot.
In fact, not only the domestic but also the international air cargo market has been in a high boom this year. The freight rate has also been at a high level for a long time. Some routes have also risen to the highest prices in history.
2. The reason for the explosion of air freight and the skyrocketing freight?
According to a report from CCTV Finance, Dexun Group East China Managing Director Fu Keqiang said that from the second quarter to the present, the four main products that have contributed to the growth of air freight are electronic products, e-commerce channel products, personal protective equipment and auto parts. , These four products accounted for the main growth factors.
Zhao Chao, a senior analyst in the transportation industry of Changjiang Securities, said that on the one hand, the shortage of transportation capacity is difficult to reverse in the short term. On the other hand, when consumption in Europe and the United States is the most prosperous, such as Christmas and other shopping seasons, the overall freight rate should still remain. The high position will continue to rise.
So how to explain to customers in English?
1. Peak season demand soars
Paul Molinaro, head of WHO's business support and logistics operations, told Reuters that a series of factors have driven prices up, including the higher-than-usual increase in e-commerce before Christmas.
According to the U.S. Department of Commerce, e-commerce sales in the United States in the third quarter increased by 37% compared with the same period in 2019. According to data collected by Buy Shares, online shopping spending during the Thanksgiving weekend (including Black Friday and Cyber Monday) increased by 20% to $29.6 billion.
According to data sent to the Global Times by cross-border e-commerce platform DHgate, shipments from China to the US accounted for approximately 68% of the platform's total sales in September. Peak season for Christmas decoration transportation. The best sellers are Santa sack, solar LED string lights, Christmas snowman, artificial flowers and Christmas masks.
We can tell our customers like this:
Airline body IATA’s chief economist Brian Pearce said that Christmas demand “exaggerates the problem” of a surge in demand for airfreight.
Airline International Air Transport Association (IATA) chief economist Brian Pearce (Brian Pearce) said that the demand for Christmas prompted the explosion of international air cargo.
The COVID-19 pandemic's impact on production in countries around the world and the nearing of Christmas, a peak season for export of Chinese products to Europe and the United States, were part of the reasons for the surge in demand for airfreight.
Due to the impact of the epidemic on the production of countries around the world and the approach of Christmas, which is the peak season for China’s exports to Europe and the United States, this is also part of the reason for the explosion of air cargo.
2. Insufficient capacity
Data from the global air cargo market showed that air cargo demand continued to grow in October, but the growth rate was lower than the previous month.
IATA Director-General and CEO Alexandre de Juniac (Alexandre de Juniac) pointed out that air cargo demand is picking up, and we believe this trend will continue into the fourth quarter.
We can tell our customers like this:
Alexandre de Juniac, IATA’s director general and chief executive, notes that the biggest problem for air cargo is the lack of capacity, as much of the passenger fleet remains grounded.That will likely be exaggerated with shoppers relying on e-commerce – 80 per cent of which is delivered by air.
IATA Director-General and CEO Alexander de Juniac said: The biggest problem with air cargo is insufficient capacity, because most passenger planes are still grounded. If shoppers continue to shop online, it is no exaggeration to say that 80% of them are delivered by air.
So, the capacity crunch from the grounded aircraft will hit particularly hard in the closing months of 2020 which were part of the reasons for the surge in demand for airfreight.
Therefore, in the months before 2020, the production capacity of grounded aircraft will be particularly severe, which is also part of the reason for the explosion of air cargo.
3. Soaring freight
It is reported that due to the impact of the epidemic, the United States announced restrictions on flights from Asia and Europe, which affected the capacity of transportation and hauling of goods. Global supply chain disruptions and restrictions have forced operators to rely on commercial aircraft, which has led to a sharp increase in the rates of all-cargo airlines.
According to a report from the International Air Transport Association (IATA), the highly anticipated releases of electronic products such as the iPhone and Play Station 5 are traditionally shipped by air during Christmas and Black Friday.
The increase in air freight demand before the holidays caused rates to soar again. From October 12th to November 9th, freight rates between China/Hong Kong and the United States increased by nearly 46%, reaching US$7.40 per kilogram, more than double the same period last year.
American Airlines President Robert Isom said last month: “From August to September alone, we doubled our cargo volume and operated 1,900 flights, serving 32 destinations in the third quarter. Provide services locally."
We can tell our customers like this:
A surge in demand for airfreight during the pandemic, coupled with peak season needs, has pushed UPS/Fedex/DHL to once again raise fees on goods flowing from China to the foreign countries.
The surge in demand for air transportation during the epidemic, coupled with peak season demand, prompted UPS/Fedex/DHL, etc. to once again increase the charges for goods from mainland China to other countries.
With holiday season upon us, shippers are yet again forced to shell out higher prices. Decreased capacity and higher rates have been a staple this year, causing fluctuating prices in air cargo especially, and in order to secure space, shippers have paid higher rates and additional surcharges.
With the advent of the holidays, shippers are again forced to pay higher prices. Declining capacity and rising tariffs are the main things this year, especially because of the fluctuations in air cargo prices. In order to ensure space, the shipper paid higher rates and surcharges.
The International Air Transport Association Brian Pearce said at a recent press conference that all signs indicate that air cargo volumes will continue to grow for the rest of the year. And manufacturers (the main driving force of air transport) are particularly bullish. In response to this situation, what are the current measures taken by all parties?
3. What are the measures taken by all parties?
domestic
Faced with the huge increase in demand for international air cargo, airlines have also increased the delivery of international cargo flights . According to statistics, China's international cargo flights increased substantially at the end of October, reaching about 2.3 times the same period last year. All airlines have invested more cargo capacity, and the frequency of both all-cargo aircraft and "passenger-to-cargo" aircraft has increased significantly.
Wang Jianmin, deputy general manager of Eastern Airlines Logistics Co., Ltd., said that the number of "passenger-to-cargo" flights increased significantly in October and November, and there were more than 100 more flights in October compared with September. In November, the number of "passenger-to-cargo" flights increased to 1,000. Around, a substantial increase from October. In November, the utilization rate of freighters reached a peak of 14 hours per day, and some exceeded 14 hours.
foreign
Lu Dongmei, China's chief representative of Lufthansa, said that in order to meet the growing demand for cargo capacity, Lufthansa has turned passenger planes into cargo planes and filled their abdominal cavity with cargo that can fly around the world. In addition to the all-cargo operations 20 cargo flights a week, but China also conducted five weekly flights on passenger aircraft turnaround.
Canadian officials said that due to the impact of the epidemic, its e-commerce market is growing, and there is a chronic shortage of cargo aircraft. Air Canada plans to convert the Boeing 767, which has recently withdrawn from passenger service, to be able to carry large containers and pallets on the main deck. The premise is that the carrier needs to reach an agreement with the pilot.
DHL Express said that due to the grounding of most passenger aircraft, the abdominal muscle capacity is insufficient, although there are plans to provide air charter services to serve certain major markets. But this year still adds six aircraft, which is to overcome the air cargo capacity restrictions caused during the epidemic.
Finally, remind foreign trade friends who are shipping by air in the near future to communicate with customers on capacity in a timely manner, and to be cautious in quoting (each airline may adjust prices frequently) to avoid unnecessary losses.
In recent months, the container market has experienced extreme conditions. High freight rates and container shortages have plagued the market and will continue for some time. In addition to the short plug of the reefer, the import and export of the reefer will also be a new challenge.
Large companies and logistics companies that need to ship refrigerated goods must be prepared, and shipping companies have announced that they will stop receiving freezers.
It is reported that the shipping company Hapag-Lloyd announced that it will suspend all 40' freezer bookings in Germany, Austria, Switzerland, Hungary and the Czech Republic until the end of December 2020.
"Our goal is to support all confirmed export orders, but reservations may be cancelled for individual cases. We will try our best to provide all customers with the best service, but we expect that the situation will remain very tense in the coming weeks." Herb Roth wrote in a statement.
"This once again shows that the market is facing severe container equipment challenges. This is a prominent problem that affects the supply chain in many places, not just the supply chain in Asia." Shipping analyst and chief executive of Sea-Intelligence Consulting Officer Lars Jensen said.
In addition to Europe, Hapag-Lloyd announced on December 3 that the port was congested due to stricter customs inspection and disinfection of imported food entering Huangpu. From now on, we will temporarily stop accepting reservations for refrigerated containers entering Huangpu Port in China until further notice.
In view of the above situation, customers are kindly requested to provide written confirmation as soon as possible. You can have the following options:
(1) If circumstances permit, accept delivery at the current port of discharge;
(2) Transfer your refrigerated container to another port/destination;
(3) Transport your refrigerated container back to the port of departure;
(4) If there is no instruction from the customer, Hapag-Lloyd reserves the right to make all necessary arrangements.
Please note that for any of the above options, all additional costs, risks and liabilities related to storage or transportation of the goods after unloading will be borne by the owner of the goods.
At the same time, Hapag-Lloyd also announced that it will temporarily stop receiving orders for imported reefer containers from Busan, South Korea to Tianjin, China , with immediate effect.
In addition, my country has recently increased its inspection of imported refrigerated goods, making the inspection of refrigerated goods more stringent and time-consuming. Ports are facing problems such as slow pickup of containers and port congestion.
Ocean Network ONE stated in the announcement that it will suspend the delivery of refrigerated containers to Huangpu Port from November 26. In addition to the latest announcement of ONE, Xiamen, Fuzhou and Fuqing have also suspended receiving imported refrigerated containers.
ONE stated that due to the stricter inspection and disinfection requirements imposed by customs on refrigerated containers imported into Xiamen/Fuzhou/Fuqing, the delivery of freezer containers has been slow and is facing congestion.
In view of this situation, from the date of shipment on December 8, 2020, ONE will stop accepting all orders for refrigerated goods destined for Fuzhou and Fuqing, China , until further notice.
Starting from the loading date on December 9, 2020, ONE will stop accepting all reservations for refrigerated cargo to Xiamen, China or for transshipment via Xiamen , until further notice.
▲ONE announcement
For containers in transit, ONE strongly recommends that customers consider changing the destination to another port, especially for time-sensitive goods, such as fresh and refrigerated goods.
For refrigerated containers that have been transshipped to Xiamen, or refrigerated containers that have been detained at the transshipment port for further transportation to Xiamen, please note that all related expenses will be borne by the consignee and paid upon delivery.
For containers that have been transshipped to Fuzhou/Fuqing or detained at a transit port, once the Fuzhou/Fuqing feeder space is available, a specific surcharge will be charged at the time of loading.
Regarding the concealment of import and export goods, let’s look at a case first:
On August 4, a violent explosion occurred in the port area of Beirut, the capital of Lebanon, on the evening of the 4th. Preliminary statistics showed that at least 100 people were killed and more than 4,000 were injured in the explosion. The Prime Minister of Lebanon confirmed that up to 2,750 tons of explosive chemical ammonium nitrate stored in a port warehouse had exploded.
These ammonium nitrates were piled up in Beirut's port area for six years "without the necessary safety measures"!
It is understood that ammonium nitrate may explode when it is shaken or close to the fire source. The conditions of the explosion are not difficult to achieve. Nitric acid will decompose at about 180°C.
Prior to this, ammonium nitrate has caused too many major explosion accidents. Developed countries such as the United States, Britain, and France have all experienced the horror of the ammonium nitrate explosion. Bloody events are disasters for every country encountered, even for humans.
Everyone must have learned about this explosion from the overwhelming reports. However, this major accident called Lebanon’s national disaster is only one of many port and cargo ship accidents. It is not difficult to find that there have been several foreign explosions in the past. It happened in ports or in cargo ships or trains.
This is bound to be reminiscent of the safety of imported and exported goods, and under-reporting is a thing most hated by various cross-border companies.
Customs declaration: This batch of goods are toothbrushes.
Glass: Who is your name?
Customs declaration: This box of goods is paper towels.
Bath towel: You insult people!
...
These are all concealment of ordinary goods, and may only involve smuggling and other issues, but a concealment of dangerous goods is like sending an untimely bomb to freight forwarders, shipping companies, and port workers. Once an accident occurs, the consequences are disastrous.
Consequences of concealment of general cargo:
In order to evade tax, deliberately concealing part of the taxable goods constitutes smuggling. The specific legal consequences should be determined in conjunction with the amount of tax evasion.
Consequences of under-reporting of dangerous goods:
Serious accidents caused by improper storage and stowage locations; damage to the safety of the crew and the vessel; use of water guns to extinguish water damage to other containers and cargo in the cabin; delays to the entire route; huge operating costs, investigation costs, etc. Etc.; fines required by local maritime customs; customs detaining boxes for several years; may be classified as criminal smuggling and other crimes; pollution to the environment...
Measures to prevent false reports
1. Strengthen professional and safety knowledge education
As a cross-border industry practitioner, we must strengthen the training and education of hazardous materials and safety knowledge, and improve our professional service capabilities.
2. Strengthen the credit review of shippers
Strengthen the credit review of the shipper, and find out the actual source of the goods for the goods whose factory address and name are relatively acceptable. In many foreign ports, concealment of goods is a criminal responsibility, so practitioners must take it seriously.
3. Ensure clear declaration of product name
Make sure that the shipper’s declaration of the cargo brand is clear. If the declaration of the cargo name is vague and general, you must ask clearly. Some chemicals are suspected of being dangerous goods, and the shipper must be required to provide chemical safety instructions and corresponding test reports.
4. New customer information is true
In addition, you need to pay attention to whether the information of new customers is true, especially those new customers who do not need to provide customs declaration, warehousing, and towing services.
5. The product name is inconsistent with the bill of lading
If the product name is inconsistent with the bill of lading, the freight forwarder Yaao will take the initiative to check the customs declaration product name to ensure that the three orders of this batch of goods are consistent.
The US Federal Maritime Commission (FMC) threatened to use all its possible powers to overturn the decision of international shipping companies to abandon the export of American agricultural products and relocate empty containers instead.
The shortage of containers and market forces have caused some shipping companies to cut the container quotas of traditional American exporters to alleviate some serious problems in the supply chain. This has had a huge impact on US agricultural exports. Reports say that some cargo owners’ quotas have been reduced from 300 containers per month to three.
Under the vigorous lobbying of the U.S. Agricultural Transportation Union and its partners, FMC announced that it would investigate these measures.
"Some shipping companies have already stated that they will no longer deploy empty containers to inland agricultural areas of the United States. Instead, they are speeding up the delivery of empty containers back to Asia." FMC Chairman Michael Khouri said at the Global Maritime Conference.
"This approach is to keep U.S. agricultural exports out of the global market. We are investigating and possible response measures, including reviewing whether the actions of these shipping companies are in full compliance with the Shipping Act, and more specifically, the Act. "Prohibited Acts" clauses in the "Prohibited Acts"," he said.
At the end of October, the shipping company Hapag-Lloyd has decided to suspend export bookings for soybeans and other agricultural products from the United States in order to return empty containers to Asia to load imported goods from the United States instead of shipping containers to the inland United States.
Earlier this month, the Special Soybean and Grain Alliance (SSGA), a US agricultural transportation organization, stated that the lack of containers and its members’ inability to load exported goods is prompting Asian customers to investigate other food buyers.
SSGA Executive Director Eric Wenberg said: "Our members have heard from Asian customers that they doubt that the United States and its agricultural exporters will continue to be reliable suppliers based on the difficulties of today's multimodal transportation."
"Marine shipping companies need to work with us to solve these transportation problems and ship our goods back to Asian ports. Otherwise, the United States has been a reputation for exporting high-quality food to foreign customers and we must take action." He added.
Magic 2020, the shipping industry has breaking news every day, and it always affects the hearts of foreign trade forwarders.
Today, the Moments of Friends screened the video of the driver grabbing the box. Truck drivers flocked to "queue" to pick up the cabinet. You earn and I grab one box, and they are almost "fighting".
This is a real response. Even if the shipping company normally releases the cabin, there is no guarantee that there will be boxes. It is difficult to find a box in China.
Another heavy news is that CMA CGM will directly stop accepting bookings from Asia to Europe in the next three weeks, and temporarily stop bookings on the Asia-Northern Europe route in the 49th, 50th and 51st weeks. The European route has basically ended this year. Booking.
In recent months, due to the uneven recovery of the global economy, the rebound of epidemics in many countries, and the arrival of traditional transportation seasons such as Christmas and New Year, congestion has occurred in many European and American ports, but many domestic ports are extremely short of containers.
Under such circumstances, many large shipping companies impose additional charges such as congestion surcharges, peak season surcharges, and shortage of containers.
Following the further surge in freight rates on the European and Mediterranean routes last week, data shows that this week, China’s export container shipping market performed stably, and transportation demand remained stable. The freight rates on most shipping routes rose, which led to a rise in the composite index.
The largest increase was the year-on-year growth rate in Northern Europe of 196.8%, the year-on-year growth rate in the Mediterranean Sea was 209.2%, and the year-on-year growth rates in the West and East of the United States were 161.6% and 78.2%, respectively. 390.5%.
Shanghai Export Container Freight Index
As Christmas approaches, shippers and their freight forwarders in Europe and North America continue to generally face the problems of container shortages, port congestion, declining capacity and soaring freight rates. Many people in the industry are talking about the current "peak season" in the container industry. "When will it end?
According to the latest analysis conducted by Lar Jensen, CEO of shipping analysis agency SeaIntelligence, on behalf of the Baltic Exchange, the answer is likely to be around the Lunar New Year holiday in February, because the options available to supply chain stakeholders are very limited.
Chinese New Year will mark the end of the "peak season" of the container industry
The root cause of the current problem is the unexpected demand for container cargo due to the global social blockade.
Jensen said that there are three key issues in meeting higher levels of demand: container, ship and port capacity constraints. He wrote: "If demand decreases, the problem will be resolved immediately."
"However, shipping companies may show their determination to reduce capacity again in order to cope with the downward trend in demand. This means that very high spot freight rates will drop, and new equipment available surcharges will disappear, but the interest rate will not It's too likely to crash." He added.
In these strange years, it is difficult for the industry to reach a consensus, but there are few signs that consumer demand will decline in the short term.
Jensen said that for many shippers and freight forwarders, the most pressing problem is the serious shortage of containers, but as China's container manufacturing plants are in full production, this problem may be alleviated before the Chinese New Year on February 12.
"This problem can be solved within a few months." He said: "The solution is that the empty containers are shipped back from Europe and North America faster, coupled with the full work of China's container factories... The current situation can be After the Spring Festival, it ended peacefully."
However, it will take longer to solve the problem of global ship and port capacity. When the capacity is insufficient, the traditional approach of shipping companies is to turn to the leasing market. However, due to the surge in demand, only a few boats are available for hire.
"As a result, the time scale for increasing capacity has changed from weeks to years now, because it will require the construction of new ships. Moreover, since the peak demand may be temporary, this solution will not help solve the problem." He wrote.
Another option for shipping companies is to increase their ship speed. Faster service can free up the structural capabilities of the shipping group, although this does increase costs.
"In general, considering the optimization of fuel, when modifying or building these ships, they cannot sail as fast as ten years ago, but there is still a certain degree of additional capacity that needs to be activated. However, this also comes at a cost. , Including the sharp increase in carbon emissions."
Finally, there is the issue of port inventory, which he admits is almost powerless in the short term.
"The surge in demand and the increase in ship arrivals have not only affected the number of containers that the port can handle, but also the number of ships that can be berthed and served."
"In addition, the surge in demand has caused larger ships to arrive with more cargo than originally planned, which means longer berth stays, a chain reaction, and subsequent ships will be delayed."
"The expansion of the port's capacity can only be measured in a few years at most. In some areas, large expansion projects can take up to 10 years."
Businesses that engage in international transport most likely prefer freight forwarding, but it is also an applicable method of transport even for personal use. The freight forwarding companies facilitate the shipment of goods to the destinations by using various carriers such as road freight, air freight, railway freight, and ocean freight.
If you don’t have any idea about freight shipping, you’ll find freight forwarding intimidating. Thus, if you engage in a business that involves international transport, it makes sense to understand the facts about freight forwarding.
WHAT ARE FREIGHT FORWARDING FIRMS?
Transporting goods from its origin to another destination is one of the services of freight forwarding firms. The freight forwarder works as a middleman between the transportation services and the shipper. They are responsible for arranging the entire process including the storage and the shipment of the goods. Likewise, they also negotiate the cost of the transport and choose the most reliable, fastest, and economical route.
SERVICES OFFERED BY FREIGHT FORWARDERS
Hiring the services of freight forwarding companies is advantageous to your business. They can help you in transporting the goods to your customers. As they are knowledgeable and expert about shipping of goods, they ensure that the merchandise will be delivered on time and in good condition.
Some of the services that freight forwarders offer are the following:
Customs clearance
Insurance
Packing
International import and export documentation
Inventory management and
Storage
Through the services of freight forwarders, the entire process of importing and exporting of goods becomes less stressful. They can also assist you in the packing of goods, thus reducing the pressure from you.
CHOOSE A RELIABLE FREIGHT FORWARDING COMPANIES
If you’re thinking to hire a freight forwarder, make sure to choose well-established and reliable freight forwarding companies. This gives you the assurance that they have strong experience about the business and good network of contacts. Likewise, experienced freight forwarders can deal and solve any issues about the transport of your goods efficiently and quickly.
As you’ll entrust your goods or merchandise to a freight forwarder, it makes sense to work with them harmoniously. It’s not enough to seek the service of a company that you can rely on and trust, but also with outstanding customer service. This way, you’ll have peace of mind that your shipment will arrive on time and safely.
Before entrusting your goods to freight forwarding firms, make sure that all the documents for transporting the goods are completed.
In recent times, there have been frequent port ship collisions. Yesterday another "bumper boat" accident occurred in Bejaia Port, Algeria. One container crashed into another unloading container ship when it was parked, and another bulk carrier was collided. The implicated damage is serious.
It is understood that the vessel involved in the accident was the container ship "VEGA SIGMA" (IMO 9330240) with a carrying capacity of 1118 TEU and flying the Liberian flag. The container ship that was hit was the "Atlantic North" (IMO 9236597) with a carrying capacity of 1119 TEU and flying the Maltese flag. The bulk carrier that was hit was "OWL" (IMO: 9441386), with a deadweight of 57,809 tons and flying the Marshall flag.
According to local media reports, on Saturday night, the container ship "VEGA SIGMA" had an electrical failure while entering the port after completing its entry procedures. The ship lost control and ran into another container ship "Atlantic North" that was unloading at berth 24. "No., the collision produced a loud noise, and some residents in the surrounding communities were awakened. A port mobile crane that was unloading was knocked down. The crane driver was seriously injured and was taken to the hospital. Due to the violent collision, the bulk carrier "OWL" on the other side of the "Atlantic North" transporting sugar for local companies was also implicated. It is understood that no one was injured except the crane driver. The three ships were damaged to varying degrees. The ship damage chart is as follows.
This is only one week after the last bumper boat incident occurred in the port of Punta da Madeira, Brazil. On November 28, 2020, when the 400,000-ton ore carrier "NSU CARAJAS" entered Pier 4 of the Port of Punta da Madeira for berthing, due to a loss of power, it ran into two berths in succession. An 180,000-ton bulk carrier at the No. 3 pier of the port.
These two large-scale port collision accidents were caused by equipment failure. Before the ship entered the port, the crew should adjust and test various mechanical equipment to make them available at any time to ensure the safety of navigation operations. The two port accidents in a short period of time also reminded all parties concerned that safety in production is the most important as the new year is approaching!
