Container shipping rates decline as recovery of exports weaker than expected
Container shipping rates decline as recovery of exports weaker than expected

Container shipping rates decline as recovery of exports weaker than expected

 

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China’s Shanghai Export Containerized Freight Index compiled by the Shanghai Shipping Exchange has been falling in the recent month as the rebound of exports has been slower than expected.

Since late June, the recovery of export shipments from China to the US has been weaker than expected and container space for the shipping route from China to Europe has been relatively loose, according to a report released by Kuehne + Nagel International AG, the world’s largest freight forwarder

It added that Shanghai’s export volume has been steady after a two-month lockdown was lifted on June 1 and the expected peak didn’t come and there haven’t signs for a high season.

In the week that started on June 17, the costs of shipping containerized freight from Shanghai to the West Coast and East Coast of the US stood at $7,489 and $10,073, respectively, falling 5.1% and 4.6% from the same period last month, according to data from the Shanghai Shipping Exchange.

“Traditionally, the period between the end of June and October is a high season for shipping demand, but the recovery of exports is slower than we thought, due to negative impacts from both demand supply side,” said a freight forwarder.

On the supply side, it takes time for the manufacturing capacity in Shanghai to fully recover and due to the lingering impact of the Covid-19 outbreaks on logistics, raw materials for industries including chemical and automobile are still in short supply, he said.

It’s more difficult to predict situations on the demand side, he added.

In the past one year, the demand fro China-US shipping had been robust. Before the start of the Covid-19 outbreak in 2020, the cost of shipping a 40-feet container from Shanghai to the US was only $1,500, before surging by nearly 16 time to as high as $25,000 in August 2021.

In recent month, the shipping rate between China and the US has been declining, with some institutions warning about a possible turning point.

Citic Futures said in a note on June 21 that the congestion at ports in the US have been largely eased and the trip time for the route from the Far East to West Coast in the US has shortened to within 30 days.

Due to climbing inflationary pressure and high inventories at retailers in the US and Europe, their imports are expected to slow further, it said.

If there is no extreme weather and severe port congestion in the third quarter, the container shipping market may not see an obvious high season, it added.

However, the container shipping rate remained at an elevated level. In the week that started on June 17, the Shanghai Export Containerized Freight Index stood at 4,221.96, sliding by 17% from the start of the year, but 11% higher than the same period last year.

The Port of Shanghai, the biggest container port in the world, still has some slight congestion.

“It may take 1- 2 month to clear the backlog of cargo at the Port of Shanghai,” said Galaxy Futures in a note.

Currently, China’s export freight volume is gradually returning to normal and restocking for the Christmas holiday in the US and Europe comes earlier than usual, shipments are expected to rebound, but due to high inventories at many retailers, the room for the rebounds will be limited, according to the note.