The foreign trade industry in China has been facing hard times recently. Containers are increasingly difficult to order, which has led to shipping container rates soaring 4 times its original rate since October. This has brought upon various hardships onto Chinese foreign trade companies.
At present, the global container terminals presented a paradoxical situation.
For every three containers exported by China, only one container is returned. Thus, there is a serious shortage of containers domestically. On the other hand, a large number of empty containers are being hoarded overseas, causing port congestion.
The most direct impact suffered is the skyrocketing shipping prices. In fact, since October, from India to South America, to Southeast Asia, to Europe, North America, etc., global shipping prices have risen linearly. Over a single night, shipping container rates doubled.
With the drastic fluctuations in shipping prices and soaring logistics costs, the survival of many small and medium-sized foreign trade companies have become more questioned than ever.
What caused the increase in shipping container rates?
In China, the outbreak of foreign epidemics in April and May had resulted in the import halt of many overseas products, especially food products. This has caused a serious stagnation in container movement. Due to hoarding in various overseas ports, China faces an extreme shortage of shipping containers.
At the beginning of the outbreak of the domestic epidemic this year, many large shipping companies had assessed that China’s export volume would drop sharply, thus reducing the shipping capacity. Under this two-way effect, when the domestic epidemic was effectively controlled, the export volume surged. However, the current corresponding containers and transportation capacity now cannot support the surge, which has caused the seaborne price to soar.
Why are the rates still soaring?
Yet, even with the expensive shipping container rates, there are still foreign trade companies that are shipping normally. Foreign trade companies usually have fixed major customers. At the beginning of the year, they have already placed orders for the whole year, signed the contract, and set the shipping price. Even if the shipping price increases, they must follow the contract agreed to deliver the goods. Otherwise, their business risk losing credit and being ruined in the coming year.
This has resulted in the current shipping environment to resemble a “mafia“. Some private Chinese firms have been stockpiling containers to be made available to the highest bidder, driving up rates as well. Moreover, vendors often have no choice but to fork out the exorbitant prices to keep their business running, even without the guarantee of container space.
“Sometimes, it’s just an endless wait until you run out of patience and ask them ‘how much do you want?’,” said Hill Xiao, who runs an export business in southern China’s Guangdong province that helps factories sell clothes and toys abroad.
“If you can’t get a container, you cannot ship things, and you can’t get the money. It really weighs on our cash flows,” Hill said.
When will the shipping container rates stabilize?
Presently, European and American countries are still in a state of lockdown. Vaccine development and promotions are also not as expected. Additionally, economic activities are restricted, and logistics personnel transportation is blocked.
Container costs had stayed high through the end of 2020, and is expected to remain on similar levels through the pre-CNY period.
However, there are also optimistic estimates. Alphaliner, a shipping consulting agency, believes that although the full recovery will not be too fast, as the global blockade due to the epidemic is gradually lifted and demand begins to recover, the supply and demand situation is expected to improve significantly. The demand next year has a chance to rise by 6.8%, while market capacity supply will increase by about 2.8%.
On December 3, the spokesperson of the Chinese Ministry of Commerce pointed out that, on the basis of the preliminary work, the Ministry of Commerce will continue to promote the increase of transportation capacity. Not only that, they will also support the acceleration of container return transportation, improve operational efficiency, support container manufacturers to expand production capacity. Furthermore, they will work on increasing the intensity of market supervision and efforts to stabilize market prices provide strong logistics support for the steady development of foreign trade.
With the intervention of strong measures, it is expected that this problem that plagues the foreign trade industry may be effectively solved.
How ODM can help
The ODM Group is working as efficiently as possible during this time of crisis to minimise the delay in shipment.
ODM has been in the promotional product industry for over 17 years and is well-experienced in producing and delivering high-quality promotional products, bespoke product packaging, and POS displays for your company. Also, our committed team of merchandisers will ensure effective logistics snd shipping management with proper planning management of the key supply chain stages. Therefore, making sure that the consignment is delivered to you efficiently. Should you have any queries, do not hesitate to contact us.
We also have an in-house design agency, Mindsparkz, to aid with your promotional product needs. They can help with brainstorming and product design.
We hope that everyone stays safe during this pandemic.
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