Crazy Shipping: Shipping Company'S Long-Term Cooperation Contract Sharply Reduced, Freight Charges Doubled Than Last Year

"Isn't the freight rate over yet? Zhou Ming (not his real name), who is in charge of a foreign trade enterprise in Tianjin, has been very upset recently. The market has been saying that since June, shipping companies will start to collect surcharge in peak season. Zhou Ming doesn't know whether to wait and wait or to grab the shipping space first.

On May 21, the Shanghai Shipping Exchange released the composite freight index of China's export containers to 2216.63 points, up 3.9% from last week. The composite freight index of Shanghai export containers was 3432.50 points, up 2.7% over the previous period.

For frequent high freight rates, the industry is at a loss. Wang Muxin, a lawyer of Beijing hollymore law firm, shelled these liner companies for increasing freight rates, which not only offset the original intention of the state to cancel port construction fees, but also greatly increased the operating costs of import and export enterprises. He thinks that the shipping alliance is suspected of conspiring to raise the price. A few days ago, the Korea Fair Trade Commission has decided to conduct an anti-monopoly investigation on several South Korean liner companies, such as HMM and Xingya shipping. China's anti-monopoly authorities should also use legal means to prevent such acts of domestic liner companies.

Small cargo owners' worries

"Now the price is three or four times higher than before the epidemic," Zhou Ming told reporters. His goods mainly run on the eastern route of the United States. At the end of last year, the freight rate had doubled compared with that before the epidemic. In January and February this year, the price could still maintain the end of last year's price. However, since April, the space was tight again, and the price began to soar. The price of 20teu cabinet rose to 7000 US dollars, The price of 40teu in May was as high as 13000 US dollars.

In April every year, it is the time for the shipowner and the shipping company to sign a new year contract. In previous years, the shipping companies came to negotiate early and asked the shipowners to promise the cargo volume and lock the hold. Unexpectedly, this year, the shipping companies are out of the ordinary and no longer take the initiative to ask. Some shipping companies even cancel this year's long-term agreement and implement the market price completely.

Zhou Ming's company can only get a very small number of shipping space, accounting for only 20% - 30% of its demand, and the rest have to go to the market to find space to fill the demand. The long-term agreement signed with the shipping company is far lower than the market price. Take Zhou Ming's contract price on hand as an example. He gets different long-term cooperative prices from different shipping companies. He also goes to the United States and East. State owned enterprises like COSCO Shipping will give very low prices, which are only 4000-5000 US dollars per box, but other shipping companies are more expensive, ranging from 6000 to 7000 dollars, and more than 8000 dollars, But on the whole, it's much cheaper than the market price of $13000.

However, although the long-term cooperative price of the shipping company is low, the space that can be given is too small. With so many shipping companies, Zhou Ming can only get five or six containers per week, and other gaps need to be found according to the market price“ The price of this kind of fluctuation period is just like an auction. If the price is lower, the one with higher price will get it. "Zhou Ming said that when he entered the trade, he encountered the strange thing that the shipping space could be recovered when the shipping space was released." because the original quotation was low, the shipping company took back the shipping space promised to Zhou Ming and sold it again. "

How can freight rates reach a new high?

Zhou Ming's anxiety aroused the sympathy of thousands of small shippers.

Cai Jiaxiang, executive vice president of the China Cargo Owners Association, said that the increase in freight rates would definitely affect the profits of shippers, and some shippers even paid nearly 10 times more freight. In the face of soaring freight charges, Li Zhimin, vice president and Secretary General of China International Freight Forwarding Association, believes that the ultimate victim is China's foreign trade enterprises, "Freight Forwarders can not make compensation, but foreign trade enterprises will face claims if they do not take delivery."

On April 29, the Ministry of transport replied to the complaint of small cargo owners in Shandong Province, saying that due to the superposition of multiple factors, the demand for international container transport has been released since June 2020, and the main liner companies have basically put their shipping capacity into the market except for necessary maintenance. Affected by factors such as labor shortage caused by the spread of overseas epidemic, ports in Europe and other places in the United States have been seriously congested since the fourth quarter of 2020. For example, Los Angeles port and Long Beach port are the most congested ports in the United States. Currently, there are more than 30 container ships waiting for berthing, and 85% of the vessels need to anchor for at least 8 days to operate; The longest detention time of container cargo at the wharf is 2 months. However, European routes usually call at multiple ports, and the whole voyage time is prolonged due to congestion in all major ports. The congestion of foreign ports, the disorder of logistics supply chain and the decrease of efficiency lead to the large-scale delay of container ships. The rate of punctuality has dropped from more than 70% to about 20% at present, which seriously affects the operational efficiency of container ships and aggravates the contradiction between the transport capacity of container ships and the supply and demand of empty containers.

The recovery of the global economy has led to a pick-up in shipping demand and a rise in shipping prices. Moreover, the Suez Canal incident resulted in limited transport capacity and a drop in short-term supply, which led to the acceleration of shipping price recovery. In fact, in addition to the surge in container shipping prices, the Baltic dry bulk index also rose to a new high of 3053 points since 2011 at the end of April.

As a result, the Ministry of transport said that the shortage of empty containers and the rise in freight rates have become a global problem. Vietnam, India, South Korea and other countries have also experienced rapid increases in freight rates, and the freight rates of some major routes have exceeded those of China. The Ministry of communications attaches great importance to the above situation, actively coordinates with relevant liner companies to optimize the allocation of shipping capacity on China's routes, increase China's shipping capacity and the strength of returning empty containers, so as to minimize the impact of large-scale delay of shipping schedule caused by congestion at overseas ports on China's import and export transportation.

It is worth noting that at present, the risk of crew shortage has not been taken into account in the current factors affecting the shipping price. However, after the deterioration of the epidemic situation in India, it has begun to appear that the epidemic situation has spread rapidly on ships due to infected crew members. At present, the ports of Singapore and the United Arab Emirates prohibit ships from replacing crew members who have recently come from India. China's Zhoushan port also forbids any ships and crew who have visited India and Bangladesh. According to relevant statistics, there are 1.6 million seafarers in the world, of which 240000 are from India, accounting for about 15%. Once these crew members can't work normally, not only will the scheduling plan of shipping companies be disrupted, but also the wages of crew members in other countries will surge due to the lack of Indian crew.

The shipping industry calls for the popularization of vaccines among seafarers as soon as possible. COSCO Shipping reports back to the 21st century economic report that the vaccination rate of the crew members arranged by the company's main ships has increased from 3.1% in January to 100% at present; The crew to be dispatched on shore should be fully received.

Lawyers bombard shipping companies to raise prices

What makes Zhou Ming and other small shippers and freight forwarders even more worried is that the current freight rate is "burning high", and many shipping companies are brewing a new wave of price increase, which will take effect on June 1.

For example, for the Pan Pacific route, MSC informed 20 TEU cabinets to increase by $800, 40teu by $1000, and Dafei by a little higher, by $900 and $1100 respectively. Zhou Ming worried that their company's goods value is quite high, and freight has accounted for 40% of the cost. Those enterprises with low value of goods may have a higher proportion of freight, and their profits are unimaginable.

Wang Muxin, who worked in maritime enterprises in the early years of Beijing haolimo law firm, later got a lawyer's license and has always been concerned about the shipping industry. He believes that although there are market factors, some shipping companies are not able to judge the imbalance. They do not actively increase transport capacity and try to increase the stock of empty containers. Instead, they deliberately create various excuses to drive up freight rates. Take Yantian port to New York as an example. A 40 foot heavy container is exported from Yantian to New York. Before the beginning of 2020, the freight rate is 2300 US dollars. By may 2021, the freight rate has soared to 12750 US dollars. In one year, the freight rate increased by 4.54 times.

He pointed out that in order to effectively reduce the burden of shipping enterprises, the state has cancelled a number of shipping charges, especially during the epidemic period, and vigorously reduced or exempted port construction fees and other port fees, with the purpose of ensuring the normal operation of enterprises. However, due to the continuous increase of freight rates by liner companies, it not only offsets the original intention of the state to cancel port construction fees, but also greatly increases the operating costs of import and export enterprises.

At the same time, the profits of shipping companies in the first quarter have reached new highs. Wang Muxin said that from the perspective of shipping finance, if the ratio of annual net profit to operating income of shipping companies can reach 3% - 5%, it is a good year for shipping companies to put on a red carpet. However, the profit margin of Hanxin shipping has reached 42%, while that of EVA shipping has reached 14%.

Wang Muxin believes that the liner company will reduce its own capacity caused by the shortage of transport capacity to the shipper, increase freight rates on the ground of market supply and demand tension, and then create a tense market atmosphere of empty containers, resulting in the situation that one container is difficult to obtain. The shipping alliance is indeed suspected of conspiracy or coordination. A few days ago, the Korea Fair Trade Commission has decided to conduct an anti-monopoly investigation on several South Korean liner companies, such as HMM and Xingya shipping. China's anti-monopoly authorities should also use legal means to prevent such acts of domestic liner companies.