Since the beginning of this year, container shipping market prices have strengthened significantly. On May 31, the Shanghai export container freight Index Composite Index was 3044.77 points, up 12.63% from the previous week, and the cumulative increase of more than 50% in the past month.

May is the traditional off-season for shipping, why is the off-season not light this year? How will rising freight rates affect our economy? The reporter interviewed industry experts and scholars on the above issues.

Demand is growing and capacity is tight

The container shipping market is highly internationalized, and the fluctuation of freight rate is mainly affected by market supply and demand. From the trend of shipping prices in recent years, the price changes with the demand is very obvious, both the increase in demand leads to the rapid rise in freight prices, and there have been low demand and low freight prices.

"The off-season of the maritime market this year is not weak, mainly because of the economic recovery and increased transport demand." Ning Tao, director of the Economic Policy and Development Strategy Research Center of the Institute of Water Transport Science of the Ministry of Transport.

Globally, the moderate recovery of the global economy has boosted trade. Among major economies, the eurozone's gross domestic product grew 0.3% quarter-on-quarter in the first quarter, ending the negative growth trend since the second half of last year and the highest quarterly growth rate in nearly two years. The US economy continued to expand in the first quarter, growing by 1.6%. Driven by consumption and investment, the US economy began to enter the replenishment stage from the fourth quarter of 2023, and the total inventory and total imports maintained a sustained growth momentum. The Organization for Economic Cooperation and Development (OECD) recently raised its forecast for world economic growth this year to 3.1% from the previous forecast of 2.9%. The International Monetary Fund expects the global economy to grow 3.2% this year, up 0.1 percentage point from its January forecast.

China's foreign trade situation exceeds expectations. In the first four months of this year, the total value of imports and exports of goods was 13.81 trillion yuan, an increase of 5.7% year-on-year, and the scale reached a record high in the same period. Driven by exports, China's port international line container throughput has maintained steady growth from 2023 to date, an increase of 10.3% in the first four months of this year, accelerating growth from the fourth quarter of last year, driving the recovery of international container shipping market demand.

"At present, the recovery in transport demand covers almost all the current major routes." Ning Tao said that from the perspective of the container throughput growth of the international line of China's port sub-routes, in addition to the Middle East and Africa, the container growth rate has slowed down, and other routes have accelerated to varying degrees, especially the United States, Australia and other routes have reversed the negative growth trend in 2023.

As demand increases, freight rates naturally rise. In May, Maersk, CMA CGM, Hapag-Lloyd and other leading shipping companies have disclosed route tariff increase information, price increases cover Asia to Europe, North America, Australia, South America and other directions of the route.

Multiple factors have widened the gap

At present, although it is not the traditional peak season, due to the longer transport cycle of European routes, some cargo owners have made certain advance purchases for the continuity and stability of production and commercial activities. At the same time, the recovery of transportation demand in Europe and the United States has accelerated the growth of cargo volume. In addition, the rapid development of emerging industries in China's export trade, such as new energy vehicles, photovoltaic and other products, superimposed on the tariffs of emerging industries in some areas, making shippers eager to ship, transport demand in the short term there are large fluctuations.

The growth rate of traffic is higher than the growth rate of capacity, and there is a capacity gap. In the first four months, the market's major liner companies in China to North America, Europe, South America and the Persian Gulf four routes a total of more than 8.3 million TEU (TEU) shipping space, an increase of 14.7% over the same period last year, completed traffic of more than 7.9 million TEU, an increase of 19.4% over the same period last year.

At the same time, the situation in the Red Sea is changing rapidly, and international shipping companies choose to avoid the Red Sea waters, and Asia-Europe container liners sail around the Cape of Good Hope. The longer range resulted in a loss of about 20% of the original capacity. In order to maintain liner services, liner enterprises supplement the capacity gap by putting in new ships, leasing ships, and deploying ships on other routes, but there is still a certain degree of capacity gap in the short term, which also aggravates the capacity tension of other routes.

The efficiency of container turnover is reduced, and the consumption of empty containers in the port is accelerated. In April, the Hongjing container new box inventory index was 143.34, down 18.43 points from the previous period, indicating that the container new box inventory declined, and the shipping capacity was affected to a certain extent.

In addition, the detour directly increased the cost of fuel and fixed expenses, insurance costs also increased significantly, the booking price of Asia-Europe route increased significantly, and then the freight rate of other main routes also increased significantly.

A gradual return to normal is expected

As the largest country in the world trade in goods, what impact will the rise in shipping prices have on China's foreign trade? How long will this rally last? What should we do about it?

In the shipping market, the container shipping price is divided into long contract and spot price, freight price fluctuations are mainly affected by the spot market price, and mainly the spot in the use of export CIF (CIF) contract, does not involve the signing of long contract and the use of export FOB (FOB) contract shippers. After years of efforts, the proportion of cargo and ship has increased, so price fluctuations have limited impact on China's import and export rates.

At present, the impact of rising freight rates on trade is global, and China's situation is relatively good. For example, the same Far East - Europe and the United States route, the price of China's route is lower than that of Japan, South Korea, Southeast Asia and other neighboring countries and regions. "According to the investigation and visit of liner enterprises, the freight rate of Japan, South Korea and other countries around China to the European and American markets is adjusted simultaneously, and the quotation of COSCO Shipping Group's Japan-Europe and American routes is slightly higher than the Chinese market 50 US dollars /TEU level." "Ning Tao said.

Li Muyuan, executive vice president of the China Container Industry Association, said that in the long run, rising freight rates offset the profits of China's exports to the European market, raising the cost of Chinese goods. In order to cope with the instability of shipping services, European retail enterprises need to increase inventory to ensure supply, which increases inventory costs. The stable operation of the manufacturing supply chain has also been significantly affected.

Rapidly rising sea freight prices and the increase in transit time caused by detours have diverted some sea freight to other logistics channels. Some goods with tight delivery time and high value are changed to air transportation, or choose "sea + air" and other methods. Part of the cargo was transferred to China-Europe freight trains, and the booking capacity of China-Europe freight trains increased.

Mr Ning said the container fleet continued to expand rapidly this year. It is expected that after the completion of the annual delivery, the global container fleet capacity will exceed 30 million TEU, an increase of about 9%. A World Trade Organization report released in April predicted that the volume of global trade in goods would grow by 2.6 percent this year. In the long run, as the spillover effect of the Red Sea crisis on the whole industry gradually normalized, the market gradually invested new capacity in the diversion, and the supply of capacity will continue to exceed demand.