Text / Reporter Jia Aosheng
Maersk and Mediterranean Shipping Company have successively advertised freight rate increases.
According to the latest data released by the Shanghai Shipping Exchange, in May 2024, the average reading of China's Export Container Composite Freight Index (CCFI) was 1,358.71 points, an increase of 14.3% compared to the previous month. At the same time, the average value of the Shanghai Export Container Composite Index (SCFI), which reflects the spot market, reached 2,643.69 points, a significant increase from the average of the previous month, with an increase of 46.6%.
(Source: Maersk official website)
On June 7, 2024, the value of the SCFI rose further to 3,184.87 points, an increase of 140.10 points from the previous reporting period, while the CCFI also reached 1,592.57 points, an increase of 6.5% from the previous period.
(Source: Xinhuanet)
Freight rates in the global shipping market have risen significantly
Freight rates have risen significantly around the world, and this is especially evident in the container shipping market. Recently, although global spot freight rates have continued to rise, their growth rate has slowed down compared with May and early June. Major shipping lines, such as Switzerland's Mediterranean Shipping Company (MSC) and Denmark's Maersk Line, have announced tariff adjustments for routes to Europe and the United States.
Since July 1, Mediterranean Airlines has raised the freight rate on routes to Europe, up to $9,800 per large container. At the same time, Maersk Line also informed customers that its freight rate for Europe routes will be increased by $2,000 per large container, up to $9,400. In addition, the Mediterranean Shipping Company also announced that the freight rate of the US East route will be adjusted, from July 1, the freight rate per large container will be increased by 2,000 US dollars, and if the adjustment is successful, the freight rate will exceed 10,000 US dollars, reaching 10,400 US dollars.
There are many reasons for the increase in freight rates. First, the recovery of the global economy has boosted the growth of manufacturing and trade, which has increased the demand for transportation services. In Germany, exporters are rushing to find more capacity due to the rapid growth of the manufacturing sector. At the same time, the rise of protectionism has also prompted exporters to speed up the delivery of goods to avoid the impact of the upcoming tariff policy.
Secondly, tensions in the Red Sea have a direct impact on global shipping. Due to the deteriorating security situation, shipping in the Suez Canal has been blocked, resulting in goods destined for the North African region having to detour around the Cape of Good Hope at the southern tip of Africa, increasing direct costs and transit times. In addition, the Panama Canal's dry climate has led to a drop in water levels, which has also affected the ability of ships to pass through, exacerbating the strain on global capacity.
In the context of globalization, logistics costs are one of the important factors that determine the competitiveness of products. If the cost of transportation is too high, even if China's manufactured products have a price advantage, they may lose their competitiveness when they reach the final market. This is especially true in the U.S.-China trade, where the U.S. is an important export destination for Chinese products.
(Source: Xinhuanet)
Overall, the increase in global freight rates is the result of a combination of factors, including the recovery of the global economy, geopolitical shifts, and changes in transportation routes.
When will China have the right to speak on international shipping?
For a long time, the international shipping market has been dominated by Western countries, and the situation on the mainland has not changed much in this regard. As the world's largest maritime logistics market, the market pricing power and dominance are still in the hands of foreign-funded enterprises.
(Source: Xinhuanet)
Looking at the whole year of 2023, the total import and export volume of mainland trade in services reached 6,575.43 billion yuan, a year-on-year increase of 10%. Among them, exports were 2,685.66 billion yuan, down 5.8 percent, and imports were 3,889.77 billion yuan, up 24.4 percent. Trade in services as a whole showed a deficit, with a deficit of 1,204.11 billion yuan
This data reflects the challenges faced by the mainland in the field of trade in services, especially in logistics services. The deficit in trade in services means that China is highly dependent on foreign services in industries such as logistics and transportation.
On the mainland, sea freight is responsible for about 90% of the volume of foreign trade cargo transportation. In the early days of reform and opening up, the mainland lacked the support of international merchant ships, and in international trade, it had no choice but to adopt FOB terms for exports and CIF terms for imports, resulting in foreign parties controlling the right to speak on transportation regardless of exports or imports.
Xu Lirong, the former chairman of COSCO SHIPPING Group, once said, "COSCO SHIPPING has the world's fourth-largest container capacity, but the container capacity in China's import and export trade is less than 20%". That's why.
Who benefits more from China-US-EU logistics cooperation?
On April 17, the Office of the U.S. Trade Representative (USTR) announced the launch of a Section 301 investigation into China's maritime, logistics and shipbuilding industries. Intriguingly, between China and the United States and between China and Europe, China has long had a trade deficit in logistics services.
China's international shipping market is mainly dominated by the four European shipping giants Maersk of Denmark, Mediterranean Shipping of Switzerland, CMA CGM of France, Hapag-Lloyd of Germany, Japan and South Korea, while China's international air logistics market is mainly dominated by UPS, FedEX of the United States and DHL of Germany.
(Source: Xinhuanet)
In 2022, the total bilateral trade in goods between China and the United States reached a record high of $690.6 billion, of which China's total exports to the United States were $581.783 billion and imports from the United States were $177.644 billion. Despite the ongoing trade dispute between China and the United States, since the establishment of trade relations between the two countries, the trade volume has increased by more than 200 times, the stock of two-way investment has exceeded $260 billion, and more than 70,000 American companies have invested in China.
In fact, it is difficult for the United States to achieve complete economic decoupling from China, because the economic ties between the two countries are not limited to direct trade and investment, but also involve multiple aspects such as global supply chains, market access, technological innovation, and international cooperation. For example, most of Apple's products are assembled in China, and American automakers such as General Motors and Ford have a lot of sales in the Chinese market.
In terms of service markets, such as express delivery and air freight, the U.S. has long had an advantage in China. The U.S. express and parcel market is expected to reach $183.98 billion in 2024 and is expected to reach $239.38 billion by 2030. UPS, for example, has been developing in the Chinese market for 30 years and continues to increase its investment in network construction in China, with 208 flights per week connecting China and the rest of the world.
Still, China's share of U.S. international trade has actually declined. In 2022, total U.S. trade in goods increased by 16.3% year-over-year, with exports up 18.4% and imports up 14.9%. Despite the steady rise in bilateral trade between China and the United States, the competitiveness of Chinese products in the U.S. market has declined. In addition, the structure of trade between China and the United States has also changed, with the growth of U.S. imports from China in 2022 mainly driven by chemicals and some mechanical and electrical products, while the growth of U.S. exports to China was mainly driven by agricultural textile products and chemical products.
Looking back at the development of China-US trade over the past few decades, from US President Nixon's visit to China in 1972 to open a new chapter in China-US relations to the outbreak of the US-China trade war in 2018, China-US trade relations have experienced many twists and turns. During this period, China has gradually risen to become a global manufacturing center, becoming the world's largest trading country in goods, with a growing fleet and a gradual increase in the strength of shipping companies, and has become an important player in the global shipping market.