China'S Supply Chain Faces Challenges

"The price of a 40 foot high box from Qingdao to Chicago in the United States is $22000." Jing Xiaoye, sales manager of Qingdao swift international logistics Co., Ltd., reported the latest shipping price to the 21st century economic news reporter on July 29. Over the same period, the price of Cabello in Venezuela also rose to $22000 / 40hc.

Because of the high freight rates, jingxiaoye's customers are now shipping less than a quarter of what they were before the epidemic. They began to worry that the continued high freight rates will force us customers to change the supply chain and purchase countries.

This is not the only concern of Jing Xiaoye's customers. Fu Rong, a customs broker of a medical device company in Shenzhen, was worried that more than 100 cabinets could not go out at the peak of the company. She was worried that the soaring prices would affect the competitiveness of China's industry.

In the face of the difficulty in obtaining one box in the maritime market, sun Wenjian, spokesman of the Ministry of communications, responded at a regular press conference in July 29 that the Ministry of communications would promote the cooperation between port and shipping enterprises and import and export enterprises. In order to respond to the transportation needs of small and medium-sized customers, the Ministry of communications coordinates COSCO Shipping Group and other active services, and provides special transportation services for small and medium-sized cargo owners through the opening of new service lines. According to sun Wenjian, in June this year, the capacity of North American routes reached 6.88 million TEUs, an increase of 55% over the same period in 2020, and that of European routes reached 4.3 million TEUs, an increase of 30% over the same period in 2020.

Freight rates are still high and containers are still in short supply

Despite the recent fluctuations in the share price of maritime stocks in the capital market, freight rates have always maintained a firm upward curve in the shipping market.

According to the latest freight index released by Shanghai Shipping Exchange, on July 23, China's composite index of export container freight was 2854.02 points, and the Shanghai Composite Index of export container freight (SCFI) was 4100 points. It can be compared that on May 21, China's composite freight index of export containers was 2216.63 points, and Shanghai's composite freight index of export containers was 3432.50 points, In the two months, they increased by 28.75% and 19.44% respectively.

If it is compared with before the epidemic, it will rise even more. Jing Xiaoye said that before the epidemic, the price of Qingdao to Chicago route (40hc) was only two or three thousand US dollars, and now it is close to ten times. Since the second half of last year, the freight rate of the whole market has gone crazy.

In the past few months, our newspaper has reported many times that the sea freight price has soared, but now the situation has not improved. The lack of containers and cabinets in the market is still unclear. Jing Xiaoye told reporters that previously, customers only needed to book space seven or eight days in advance, but now they need to pay more than a month in advance and pay a deposit. As for the freight rate, the price can not be obtained when booking space, and the freight rate is only known about a week before departure. Even so opaque and complicated, many small and medium-sized freight forwarders and shippers still flock to it. Because the demand is several times higher than the space released, and the price of booking space early is cheaper than the spot market.

Maersk recently released the "Asia Pacific latest market information (July 2021)" report. Maersk pointed out that European shipping delays are affecting Asian exports, and the situation is expected to continue to deteriorate. Due to the surge in demand in Europe, the container traffic from Asia to Europe has soared. At the same time, due to the negative impact of European epidemic prevention and control measures, the main ports in Europe have been congested, resulting in delays in shipping schedules of several Asian European routes.

In the North American market, empty container inventory continues to overstock. With the arrival of the peak season, North American ports continue to be congested, which will slow the speed of empty containers back to Asia. Port congestion in North America not only affects the utilization rate of trailers and is not conducive to North American exporters, but also causes ship pressure, which may lead to the continuous deterioration of container shortage in Asia.

In other words, the supply and demand of the shipping market in the second half of the year is still quite tense, especially the lack of containers.

Wang Jiawei, Secretary of the board of directors of Bohai leasing, told reporters that since the second half of 2020, the price of new 20 foot dry containers has continued to rise, reaching the highest level in the past 20 years. According to the data of Harrison consulting, the rental level of new containers has also increased simultaneously. Q1 in 2019 and 2020 is about $0.4/day, and by 2021, Q1 has reached the level of $0.9/day, which has doubled. The size of container fleet held by container leaseholders increased by 1.3 million TEU between 2020q1 and 2021q1. The size of container fleet held by Cai, textainer and Triton, the three largest Container Lessors listed on NYSE, increased by 8.5% from 11.17 million TEU to 12.12 million TEU in q1-2021q1.

China's supply chain challenges remain grim

The Ministry of transport is obviously concerned about the crux of the problem. Sun Wenjian said that in the first half of this year, the total import and export value of China's goods trade was 18.07 trillion yuan, an increase of 27.1% and 22.8% respectively over the same period in 2020 and 2019; Among them, the export was 9.85 trillion yuan, 28.1% and 23.8% higher than that in 2020 and 2019 respectively. With the rapid growth of the import and export market, it is necessary to match the port container related freight, otherwise China can not complete the import and export of these goods.

However, it is a pity that although China has overcome the sudden port epidemic situation, it has maintained the normal operation of China's ports and achieved positive growth. However, Delta new coronavirus has spread to 132 countries and regions, and many countries are back into the situation of rapid increase in cases. The repeated overseas outbreaks also lead to poor international logistics supply chain, reduced transportation efficiency, and short supply of ships and empty containers. According to the data, in the first half of this year, China's ports completed a cargo throughput of 7.64 billion tons, an increase of 13.2% over the same period in 2020 and an increase of 13.9% over the same period in 2019. The container throughput reached 140 million TEUs, an increase of 15.0% over the same period in 2020 and 8.8% over the same period in 2019.

Sun Wenjian said that since April, due to the sudden events such as the Suez Canal blockage and the outbreak of epidemic in some countries, the transport capacity of major routes including China has been in constant tension, and the supply and demand of transport capacity have been seriously unbalanced, making the rise in freight rates a global phenomenon. At present, the freight rates of major routes in most countries around China are higher than those in China. The Ministry of transport attaches great importance to this and takes active measures together with the Ministry of Commerce and other ministries to ensure smooth international shipping.

The Ministry of communications also actively guides international liner companies to increase the transport capacity and container supply of mainland China's export routes, so as to improve the efficiency of container transportation. Sun Wenjian disclosed that in June this year, the capacity of North American routes reached 6.88 million TEUs, an increase of 55% and 26% respectively over 2020 and 2019; The capacity of European routes has reached 4.3 million TEUs, which is 30% and 7% higher than that in 2020 and 2019 respectively. The Ministry of communications also encourages liner companies to use general cargo ships, special vessels and other transport containers to increase the supply of transport capacity when meeting the safety requirements.

While increasing transport capacity, container capacity is also increasing. The Ministry of communications cooperates with and coordinates with China's box making enterprises to increase production. At present, the monthly production capacity has increased from 200000 TEUs in the past to the highest production capacity of 500000 TEUs in history“ In June, the shortage of empty containers in China's major ports was 1.4%, a decrease of 12.2 percentage points over the beginning of the year. This group of data shows that the vacancy of empty containers has been effectively alleviated. " Sun Wenjian said that the Ministry of communications also encourages liner companies to actively sign long-term transportation contracts with shippers to provide stable supply chain service guarantee. In order to respond to the transportation needs of small and medium-sized customers, coordinate COSCO Shipping Group and other active services, and provide special transportation services for small and medium-sized cargo owners by opening new service lines.

But small shippers worry that these measures can help them in time. Because the shipping price is too high, even higher than the value of a box of goods, European and American customers are increasingly unable to bear such high prices of Chinese goods. Zhou Ming, head of Tianjin foreign trade enterprise, revealed that the shipment volume has been much less than before, and the shipment volume of all customers of Jing Xiaoye is less than 1 / 4 of that before the epidemic. The salesman of a freight forwarding company in Guangzhou who does not want to be named also reveals that the shipment volume has been declining in recent months.

"We are worried that the soaring shipping prices will affect China's industrial competitiveness and supply chain. After all, Chinese goods used to be synonymous with good quality and low price," Fu said.

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