Changes: has the inflection point of shipping price come due to the falling freight rate and loose shipping space?

The following article comes from houlang small class, the author of houlang school

Quietly falling sea freight prices

On April 22, China's export container freight index (CCFI) was updated as scheduled to 3109.78 points, down 0.6% month on month. After the CCFI hit a new high in recent years in the fourth quarter of 2021, it has been more than 18 weeks since December 2021.

Behind the ups and downs of CCFI is the collection of 22 Chinese and foreign shipping companies with the highest market share and the rise and fall of weekly sea freight.

According to a report from Zheshang securities, more than 80% of the goods in Global trade were completed by sea from 2019 to July 2021. China's foreign trade import and export goods are far more dependent on shipping, up to 94.8%.

Therefore, in the eyes of secondary market analysts, CCFI is a high-frequency data used for cross verification when discussing the prosperity of cross-border e-commerce industry. A transportation analyst who asked not to be named told Hugo that the soaring price of cross-border shipping is actually a concentrated embodiment of the prosperity of international trade; Freight rates are always accompanied by a single volume spiral.

An objective fact is that the weighted average price of 40HQ high cabinets soared from about 6000 US dollars / cabinet in the first quarter of 2021 to about 15000 US dollars / cabinet in the first quarter of 2022, and recently fell back to around 10000 US dollars / cabinet. For most of 2021, high cabinet prices are rising. During the craziest period, 20000 dollar cabinets are also common.

However, the continuous rise of shipping costs does squeeze the profits of cross-border sellers to varying degrees. According to incomplete statistics, there are 8 cross-border sellers listed and have published the financial report or the first quarter report of 2021. Their revenue has maintained growth, but their profit margin has declined; In the chapter of "discussion and analysis of business conditions" in their financial report, words such as "affected by high shipping costs" can be seen.

Selling like music, sea freight accounted for 14.45% of its cross-border e-commerce business revenue in the first quarter of 2022, with a year-on-year increase of 8.43%. In order to smooth out the further erosion of high freight rates on profits, lege spent US $32.6 million for a "scheduled ship" with a transportation capacity of 1800teu (international standard container unit), which is planned to be delivered in the first quarter of 2023. In some operations, the prediction of the future freight trend by music and song is self-evident.

Different from the big sale, most of the small and medium-sized sellers with more long tails passively wait for the inflection point to appear.

The downward trend of shipping prices in the first quarter of 2022 has brought their hearts back to their chest. Most of them do not know whether it is the relay of the CCFI downlink cycle or the "night before" when the freight rate turns up again.

After all, predicting the future trend of shipping costs is like divination or fortune telling; It is not only a metaphysics, but also a philosophy. It can even be regarded as a "science" in some aspects.

02

Slowly rising profit margin

For some sellers, the positive change began with the shipping company's accommodation easing in April.

Li Xiang, a seller of outdoor products on Amazon North America station, told Hugo that "there is no need to grab the shipping space now. For example, the express ship that intercepted the goods at 12 noon today (April 27) can place orders at 11:30".

Not only is the shipping space loose, but the sailing frequency reported by some freight forwarders is not as high as last year. Zhang Liang, a 3C seller at Amazon North America station, found that the freight forwarding company, which previously maintained a long-term cooperative relationship and mainly focused on cost-effective express ships, has changed its sailing frequency from once a week last year to once every two weeks now.

For the change of sailing frequency, Zhang Liang put forward his own opinion to Hugo cross-border, "either the original cost-effective express ship (aging 30-40 days to the warehouse) was pulled to take a more profitable express ship, or there was less delivery. Otherwise, there were some port reasons, and the wharf was not so blocked".

During the most congested period of the US West Route in 2021, Li Xiang's goods once floated near the west coast of the Pacific Ocean for nearly a month and a half before they were successfully unloaded at Long Beach port. But unloading is just the beginning of a nightmare.

(three stage backtracking of freight rate rise / figure: Guohai Securities)

From the wharf of Changtan port to the transfer center, due to the mismatch of truck transport capacity, it is only a short distance of more than ten kilometers. During that time, almost 50% of the trunk transportation cost has to be divided. This section of the road is also the "culprit" of creating congestion and swallowing the prescription. In September 2021, the waiting time for truck loading and unloading at Long Beach port and Los Angeles port once exceeded one and a half hours.

The more difficult contradiction is the gap of truck drivers. According to the data of the American Truck Transportation Association, the number gap of truck drivers in the United States exceeded 80000 in 2021, a record high. Meanwhile, the American Truck Transportation Association estimates that the gap of truck drivers in the United States may exceed 160000 by 2030.

Only in the past quarter, in addition to the still stretched truck capacity. Once scarce shipping space, unpredictable timeliness, rising freight rates, everything has become a little different.

Li Xiang told Hugo cross-border, "if you take the Meisen express in December 2021, it will take about one and a half months for the products to be put into the warehouse and put on the shelf from the time of taking the goods away. Now it only takes about one month, and sometimes it is a little faster than expected.".

After experiencing the "great shipping congestion" in 2021, when Li Xiang described the positive change of shipping timeliness in April, in addition to the joy revealed, he was more confused about the reasons behind the change. In previous years, with the peak season of prime day approaching, there will always be more or less rising freight rates and tight shipping spaces.

Li Xiang said that the most intuitive benefit he felt was the reduction of the first trip freight. "Now our products take the express ship on the western line of the United States, and the price is 30% - 40% lower than that in the peak period of freight rate in the fourth quarter of 2021.".

He made a cross-border account with Hugo, "the sea freight price decreased by 30%, corresponding to my total cost decreased by 1% - 3%, which may actually reach 5%". The profit of small goods is affected by the fluctuation of freight rate, which is far less than that of large goods.

In Li Xiang's view, the current decline in shipping costs, the reduction in the quotation of shipping companies is only one of the main factors. The other factor is that some freight forwarders started to set prices last year, which has almost disappeared now.

03

Plummeting freight volume and transferred orders

"Are there any goods to be delivered recently? What are they?" This is what Liu Ming said most recently.

Liu Ming runs a freight forwarding company in Fuzhou. Since the beginning of April, the most important work of him and his employees every day is to ask new and old customers about shipment arrangements.

Liu Ming told Hugo that "there is no shortage of transportation capacity now, what is missing now is goods". At this time last year, the situation was quite the opposite. Finding the spare space of the shipping company was a top priority at that time.

Liu Ming admitted that in the past two years, freight forwarders want to obtain excess profits, there are two major preconditions - the scarcity of transport capacity of international shipping routes and the continuous blowout of sellers' shipments. Usually, the profit distribution is that the liner company eats meat and the freight forwarder drinks soup according to his ability.

COSCO Haikong is the fourth largest liner company in the world, with 11.65% of the world's shipping capacity. In the fourth quarter of 2020, the freight rate is in the second stage of climbing. In those three months, COSCO Haikong's deducted non net profit reached 6.01 billion yuan, 3.79 times that of 2019.

Also from October 2020, the shipping gross profit margin of traditional freight forwarding business of China trade logistics "takes off in situ".

Now, these two preconditions that run through 2021 begin to disintegrate gradually after the Spring Festival in 2022.

First, transport capacity is no longer a scarce resource. Sea intelligence, an international maritime analysis agency, reached a conclusion after analyzing more than 60 major liner companies around the world. Since the beginning of February 2022, the capacity deployed on the route from Asia to the west of the United States has increased every week. The peak transport capacity exceeded 100000 TEUs, much higher than the average level in 2017-2019. It is estimated that the weekly transport capacity will reach 363900 TEUs from February 1 to April 23.

If the price factor is not considered, China's imports and exports fell sharply year-on-year in March from the physical quantity of imports and exports. Customs supervised freight data showed that in March, China's export freight volume decreased by 52.3% year-on-year, while the import freight volume decreased by 15.1% year-on-year.

The decrease of China's export freight volume still showed no obvious signs of recovery in April. According to sonar data, from April 6 to April 15, the container export volume of Chinese ports fell by more than 31%. Moreover, as the volume of goods entering the U.S. truck transportation and multimodal transport network decreases, this slowdown in freight volume will also affect the U.S. land freight market.

Another small fact is that the container throughput of Long Beach port in the United States continued to reach an all-time high in the first quarter of 2022. According to the data, in the first quarter of 2022, the container throughput of Long Beach port reached 2.46 million TEU, an increase of 3.6% over the same period in 2021, which is the best quarter in the port's history and an increase of 55000 TEU over the record in the fourth quarter of 2020. The hidden meaning of this set of data is that the proportion of containers from China in the containers at Changtan port is gradually decreasing.

According to the data released by the General Administration of Customs of Vietnam, the total import and export volume of Vietnam in March 2022 was US $67.37 billion, an increase of 38.1% month on month. Among them, the export volume was US $34.71 billion, a month on month increase of 48.2% and a year-on-year increase of 14.8%. In the first quarter of 2022, Vietnam's total import and export of goods reached US $176.75 billion, a year-on-year increase of 14.3%. Among them, the export volume was US $89.1 billion, a year-on-year increase of 13.4%.

Vietnam's Ministry of industry and Trade said that the United States was Vietnam's largest buyer in the first quarter of 2022, with revenue of US $25.57 billion. This also confirms the discussion and conjecture that some foreign trade orders have accelerated from China to Southeast Asia since March 2022.

Under the physical blockade caused by the epidemic and some difficult to describe but well-known reasons. A visible fact is that at present, some cities, whether domestic demand or foreign trade, have fallen into a temporary suspension.

Liu Ming said that as a pessimist, he is used to describing his business and life with a sentence in the three bodies - any detached thought will fall to the ground, and the gravity of reality is too heavy.

But or, as Nietzsche said - I love that kind of people who do not seek reasons for decline and sacrifice from the other side of the starry sky, but only die to the earth.

Everything will be back on track one day.

Source / houlang small class (ID: hlxxb2020)