How To Deal With The Current Rising In Ocean Freight Rates
Background
The information from our strategic freight service provider is that the current space is only increasing, not decreasing. From the perspective of the freight rates of our export orders, they have started to rise sharply in mid-April, and now all routes are very high. It is currently expected that most of the freight in June.
Advice & Solution
In order to cope with the current increase in freight rates, we have proposed several countermeasures:
1. On the basis of the original one-month free storage period after the completion of the production of goods, the free storage time will be extended by one month, and the production will be carried out according to the normal time, so that the goods can be prepared in advance, and the latest freight rates of the corresponding orders will be updated weekly, and the shipment will be made at the right time.
2. For orders that originally had pre-installation requirements, it is recommended to consider changing to standard disassembly and packaging to reduce the freight transportation cost by reducing the volume of goods.
Deep Information For Sea Transportation
There is a shortage of cabins and containers, and the freight rates continue to soar! The US route and South Africa and West Africa have risen by nearly a thousand US dollars, an increase of nearly 60% in one month.
The early arrival of the peak season on European routes and the demand for replenishing inventory on the US route have jointly promoted the general increase in freight rates on all routes. The latest Shanghai Freight Rate Index (SCFI) released on May 31st rose by 12.63% to 3044.77 points, rising for eight consecutive weeks and breaking through the 3000-point mark in one fell swoop. Among them, the increase in the US and African routes was the most significant. The increase in one month was nearly 57%. Specifically, the freight rate of the US West route rose by nearly 1,000 US dollars, with a weekly increase of 18.87%, and the freight rate of the US East route rose by 11.17%. The freight rates of the Mediterranean route and the European route also rose by 11.11% and 9.71% respectively. It is particularly noteworthy that the freight rates of the US West and the US East broke through the US$6,000 and US$7,000 mark respectively. In terms of other routes, the freight rates from Shanghai to West Africa, South Africa and South America also rose sharply by US$799, US$936 and US$343 respectively. Freight forwarding industry insiders said that in addition to the early appearance of the peak season effect, some customers chose to ship in advance in order to reduce the impact of rising freight rates, which also increased the volume of sea freight. In addition, the United States has imposed tariffs on imported electric vehicles, batteries, computer chips, medical consumables and other products, and some products will take effect on August 1, which has also prompted related companies to speed up shipments in advance. At the same time, the industry has found that many companies are gradually dispersing their factories to West Africa, South America and other places in order to circumvent tariffs, which has further promoted the increase in transportation demand from the Far East to West Africa and South America, and prices have also risen accordingly.
Shipping companies have announced price increases from June 1, including a price increase of US$1,000 per 40-foot container on the US line, and an additional peak season surcharge of approximately US$600; and a price increase of US$1,200-1,500 per 40-foot container on the European line. This week's SCFI quotation has partially reflected these changes. Due to frequent reports of container shortages in the market, the industry expects that freight rates will have a chance to remain high in the third quarter.
Freight forwarding companies pointed out that on June 1, the freight rate for each large container in the West Coast of the United States was about US$6,400, the freight rate for the East Coast of the United States was about US$7,500, and the freight rate for the European line was about US$6,300, which were already very high freight rates. In June, shipping companies dispatched overtime ships in Shanghai and Shenzhen, where the shortage of cargo space was the most serious. COSCO and OOCL also opened SEA32 regular routes for e-commerce cargo, charging only a single freight rate (FAK), which is estimated to be a new route dispatched by the continuous delivery of new ships. Shipping companies claim that the current shortage of ships is due to the natural reduction of classes caused by the detour of ships. However, freight forwarders pointed out that shipping companies also deliberately reduced classes, otherwise they would not be able to dispatch overtime ships to meet demand. Regarding the shipping companies' plan to significantly increase freight rates on June 1 and 15, some super-large cargo collection companies predict that US officials and shipper organizations may take action to curb the surge in freight rates to avoid exacerbating inflation. Therefore, it is estimated that the freight rates in July should be adjusted downward.
Industry insiders analyzed the current shipping situation and pointed out that the chain reaction caused by the shortage of shipping capacity and the reduction of voyages. First, some ports were forced to "jump ports", causing some supply chains to break and affecting the capacity scheduling in the east and west of the United States; second, some regions even saw "blank flights", meaning that the originally planned flights were canceled. When the flights were resumed, they would face the problem of container scheduling. In addition, some containers could not return to the unloading port in time, resulting in a shortage of containers. In this case, in order to ensure the capacity of the main markets, shipping companies operating ocean routes will give priority to allocating containers to countries such as Europe, the United States, Central and South America, and the Middle East, which further exacerbated the shortage of containers on near-sea routes.
