The Crisis of Monopoly by Shipping Companies

Issuing time:2024-06-24 15:16

A lack of available space on container ships, mainly due to the big detour taken by shipping companies round the Cape of Good Hope to avoid the unstable situation in the Red Sea, is causing delays for many Chinese exporters. And as a result, shipping rates from Asia are spiralling.

“There is no available space until the end of May,” Ji Sen, the head of a large freight forwarding company in the Yangtze River Delta, told Yicai, “Supply cannot meet demand.”

“Sea freight rates have jumped twice recently, each time by around USD3,000, and hit a high of USD6,100 per forty-foot equivalent unit earlier this month,” Ji said. Prices could top USD7,000 by the end of the month, he added.

Container freight rates from Asia are now around USD1,000 per FEU higher than the end of April, according to digital freight platform Freightos. It costs around USD7,000 to ship a forty-foot container to the US west coast and northern Europe, USD5,000 to the Mediterranean and USD8,400 to the east coast of the US.

The tight capacity has created a huge backlog. “Whether the destination is the Middle East, Europe or South America, shipments are being delayed,” said Ding Yandong, a foreign trader. Four of his containers are still waiting to set off and the soonest delivery date is almost a month later than expected.

Business volume has dropped because of the soaring freight rates, a source in charge of a freight forwarding company in eastern Zhejiang province told Yicai.

There are many reasons for the tight capacity. The circumvention of container ships round the Cape of Good Hope has led to less space on large shipping networks and even affected routes that do not pass through the Suez Canal, according to Canary Islands-based Freightos.

Another reason is the rebound in overseas demand. In the first four months, the total value of China’s imports and exports climbed 5.7 percent year on year to CNY13.8 trillion (USD1.9 trillion), of which exports advanced 4.9 percent, according to the General Administration of Customs.

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