2021-12-22The sea and air freight markets are flying together. What is the hidden truth behind it?

1. The logic behind the existence of exotic goods in the shipping market

This year, the shipping market has become the hottest and most concerned topic in the cross-border logistics field. Under the influence of the epidemic, the shipping market has ushered in a super market of "unusually seen in a century", but cross-border people find it increasingly difficult to ship goods.

The repeated delta virus in India has caused most of the routes to be blocked this year. 11 of the world's 12 largest container shipping companies have reduced their capacity. The supply of ocean-going vessels in my country is on a downward trend. In 2020, the number of ocean-going vessels in China was 1,499, a year-on-year decrease of 9.9%, and a decrease of about 900 vessels compared with 2016, a decrease of 39.8%.

Image source: "Cross-border Logistics Ecological Research Report" 2021 Semi-annual Issue of Xiaosheng Research Institute

At the same time, overseas epidemics have spread, port operators have dropped sharply, and some countries have even experienced strikes, and port cargo handling efficiency has dropped sharply.

With reduced capacity, cargo overstock, low operating efficiency and insufficient operators, port congestion has become more and more serious. At present, congestion has spread to all major ports in the world, among which the US West Port has become the most congested port in the world.

Take the Port of Los Angeles, the largest port in the United States, as an example. Most of the cabinets that arrived in Hong Kong in July were still not able to be picked up by August, and even an appointment to pick up the cabinets was not possible.

In addition, after some shipping company's containers arrived at the port, they were originally to be transferred to the interior of the United States via the Los Angeles railroad. However, after three or four months, some containers were still stranded in the port and did not get on the train at all.

The congestion of the Los Angeles port is mainly due to the low efficiency of terminal operations. Some local infrastructure equipment, service resources, labor and other resources in the United States are in a state of shortage, and the port turnover rate has dropped sharply.

Among them, the shortage of truck drivers is particularly prominent. According to statistics from the American Trucking Association (ATA), before the outbreak, the shortage of truck drivers in the United States increased from 48,000 in 2015 to 61,500 in 2019. Now American truck drivers The gap is more than 80,000.

At the same time, uncontrollable factors at some key nodes have also exacerbated port congestion. For example, the U.S. dock union is so powerful that it will stop when it says it stops, regardless of how many ships are waiting to dock at the seaside.

The epidemic continues to repeat, the imbalance of transport capacity supply has become more and more serious, and the international logistics supply chain has been blocked, which has led to a sharp drop in the efficiency of container turnover. As of November 18, there were still more than 80 cargo ships waiting in line outside the Port of Los Angeles, and the average waiting time reached 18.4 days.

According to Gene Seroka, executive director of the Port of Los Angeles, there are still 71,000 imported containers piled up at the Port of Los Angeles. Although the situation has improved compared to October, there is still a lot of work to be done.

Containers are stranded at the port and cannot return. Under the influence of short supply, prices continue to rise. Take Maison’s cabinets as an example. Mason Clippers depart from Shanghai and Ningbo to Long Beach Port in the United States. The time limit is about 10 days, which is comparable to air freight, so it has become the first choice for many sellers and logistics companies.

A Mason cabinet was released from the East China Shipping Company at a cost of more than US$10,000. However, when it was resold through layers of agents from East China to South China, and finally resold to the FBA head logistics provider in Shenzhen, the price of the cabinet changed. It is about 40,000 US dollars, and even individual cabinets reach 50,000-60,000 US dollars.

If calculated at an average of 40,000 US dollars, the exchange rate is approximately 240,000 yuan, which is higher than the value of many cross-border e-commerce sellers.

Foreign ports are congested, labor shortages, containers are insufficient, goods cannot be transported, and most of the capacity is stranded. Each chain is driving profound changes in the global logistics supply chain. Under the changes, the ocean freight market is "exotic goods to live in", and ocean freight rates have skyrocketed as a result.

According to the 2021 semi-annual report of the "Cross-border Logistics Ecological Research Report" of the Xiaosheng Research Institute, the Clark Sea Index has been rising for 11 consecutive months, the longest in history. The average daily income of the global shipping industry in August is as high as 37,400 US dollars. /Day, a 13-year high.

In terms of US and European routes, according to data from the International Shipping Federation, in July 2020, the one-way shipping fee from China to the US was quoted at US$4,000 per TEU. In August this year, it was US$20,804. At the end of July, it was US$11,000, an increase of 89.13% year-on-year and month-on-month. An increase of 265%. The benchmark freight rate for standard containers to European destination ports rose by about 11% in June, and the freight rate for large containers rose by 7%.

For Southeast Asia routes, freight rates have risen sharply recently. In Vietnam and some ports in Thailand, Indonesia, and Malaysia, freight rates have generally risen to more than US$3,000, reaching the highest point since the epidemic. According to data from Ningbo Shipping Exchange, in November, the freight index of Thailand-Vietnam route increased by 72.2% month-on-month, and the freight index of Singapore-Malaysia route increased by 9.8% month-on-month.

Looking back to China, on December 3, my country’s export container freight index was 3199.03 points. From a trend point of view, the freight index has declined slightly in the past two months, but the overall freight index is still at a high level.

Image source: Shanghai Shipping Exchange

Taking Shanghai Port as an example, the container freight index for Shanghai exports has risen overall. Shanghai Shipping Exchange released a comprehensive freight index for Shanghai export containers on December 3, which was 4,727.06 points, an increase of 125.09 from a week ago. The freight rates of the Shanghai Port West Coast and East Coast routes remained at a relatively high level.

Image source: Shanghai Shipping Exchange

On the whole, before October 2020, the shipping market was in a relatively stable state. After October 2020, shipping rates began to soar, showing a hockey stick growth trend. At present, the ocean freight rate is still hovering at the highest level in history, and it is difficult to drop in the short term.

Image source: Xiaosheng Research Institute

The main reason for the fluctuation of ocean freight rates is the imbalance between supply and demand in the market. Affected by the epidemic, countries are increasingly demanding materials. At present, only China still maintains strong productivity, and the cross-border e-commerce supply chain is in a normal state. Therefore, the global procurement supply chain will be more dependent on China, and the domestic export volume will still rise.

However, whether it is in the United States or Europe, faced with the surge in cargo volume, the operation of airports and terminals is difficult, the capacity and manpower for handling cargo are in short supply, and shipping companies have not anticipated a substantial increase in the arrival of cargo, and there is no corresponding shipbuilding. Plans and container-building plans are used to make up for it. Various factors have made the capacity from China to markets such as the United States and Europe in a short period of time in a state of serious shortage.

At the same time, the serious inequality between the operating efficiency of the port of departure and the port of destination has caused containers that should be recycled into disposable products. Many containers cannot return to the port of departure smoothly. Therefore, exporters not only have to pay high freight rates, but also extra Bear the cost of using the container.

In addition to the imbalance between supply and demand in the market, the reason for the increase in freight prices may also involve the problem of some agents making the difference in the middle. Because resources are in the hands of a few people, information gaps are destined to exist, and resource matching is seriously insufficient, which further causes freight rates to be speculated by middlemen.

2. The air freight market is picking up, and capacity is still a challenge that is difficult to overcome

Port congestion, the difficulty of finding a container, and the continued high freight rates have gradually weakened the low-cost advantage of ocean freight, prompting the volume of ocean freight to gradually shift to air freight.

According to the Freight Forwarding Branch of the China Federation of Logistics and Purchasing, the air freight price has increased by nearly 100% compared with 2019. Taking a B787-900 charter flight as an example, the chartered flight price in May 2019 was only about 1.3 million yuan. The charter flight price in May of this year was about 2.6 million yuan. The freight rates from Shanghai to North America and Europe rose vertically in August.

Image source: "Cross-border Logistics Ecological Research Report" 2021 Semi-annual Issue of Xiaosheng Research Institute

However, the gap is gradually narrowing between the continuously high air freight price and the continuous "high fever" sea freight price. The International Air Transport Association (International Air Transport Association) and industry experts said that before the epidemic, the average price of air cargo was about 13-15 times that of ocean freight, but now it is only 3-5 times more expensive than ocean freight. Coupled with the advantages of air transportation in terms of timeliness, many suppliers choose air operations as the preferred route.

Image source: IATA

Throughout the 20 years of in-depth development of globalization from 2000 to 2019, global air cargo has increased significantly with the growth of global trade, but it is also very vulnerable to external factors. The outbreak of the epidemic in 2020 has had a very large impact on global air cargo, and even during the most severe period of the epidemic, abdominal cargo capacity has basically disappeared.

But after nearly two years of stagnation in the travel and aviation industry, the air cargo market is showing signs of recovery. The global air cargo market data released by the International Air Transport Association shows that, year-on-year before the epidemic (2019), global demand is in a state of resuming growth.

Compared with the level before the epidemic (October 2019), global freight demand in October increased by 9.4%, reflecting the overall optimistic outlook for air cargo. The congestion of the maritime supply chain has further increased the choice of air transportation channels. The International Air Transport Association predicts that air cargo demand will continue to be strong. The demand in 2021 will be 7.9% higher than the level in 2019, and the demand in 2022 will be 13.2% higher than the level in 2019.

Willie Walsh, Director General of the International Air Transport Association, said that the worst moment of the crisis has passed. Although serious problems still exist, the road to recovery is emerging, and the aviation industry has once again proved its resilience.

Domestically, from 2019 to 2021, my country's aviation logistics market showed a trend of first decline and then rebound. On the one hand, the aviation supply chain has been impacted, the number of passenger flights has dropped sharply, and the belly cabin capacity of passenger planes has dropped significantly. In 2020, the number of takeoffs on international routes has dropped by 71.8% year-on-year; on the other hand, since 2020, air cargo demand has gradually recovered from the downturn. , The transportation demand for epidemic prevention materials, vaccines, etc. is huge.

Image source: Civil Aviation Resource Network

Affected by the epidemic, a large number of passenger flights on international routes have been grounded, and the belly hold of passenger aircraft has decreased, while the demand for all-cargo aircraft has increased. In January 2021, the volume of cargo and mail transportation has returned to the level of the same period in 2019, and will exceed the level of the same period in 2019 from February 2021.

The upgrading of export products and market diversification in foreign trade, and the explosive growth of express delivery business has brought new development opportunities for my country's air cargo. With the resumption of passenger flights and the increase in cargo capacity, air cargo will gradually resume its growth trend.

According to data from the Civil Aviation Resource Network, the total cargo and mail transportation volume completed by civil aviation from January to October was 6.019 million tons, an increase of 11.8% year-on-year, and it has returned to 98.5% in the same period in 2019. (From January to October of 19 and 20, 6.113 million tons and 5.382 million tons respectively)) Among them, a total of 604,000 tons of cargo and mail transportation were completed in October, an increase of 0.8% from the previous month.

Figure: Civil Aviation Cargo and Mail Transportation Volume in 2021 and Comparison of the same period in 20 years and 19 years. Drawing: Civil Aviation Resources Network

The demand for air cargo is not only recovering from the epidemic crisis, but also gradually increasing. However, strict capacity constraints continue to limit the ability of air cargo aircraft to absorb additional cargo demand. Finding sufficient capacity has become one of the main challenges faced by air cargo.

Data show that during the epidemic, about 50 airlines around the world were liquidated, involving about 1,200 aircraft, and about 300 new aircraft orders were cancelled. Among them, the number of freighters far exceeds 70. After the company was liquidated, its capacity was frozen and it was difficult to revitalize it in the short term. The domestic air transport capacity is still in a state of continuous tension.

As we all know, cargo planes are an important carrier of air cargo, and about half of the world's air cargo is transported by cargo planes. However, compared with the mature foreign air cargo transportation mode, our country is still dominated by mixed passenger and cargo operations. The cargo volume in the belly compartment of passenger aircraft accounts for 2/3 of the total air cargo volume, and all-cargo aircraft only accounts for 1/3. Cargo flights on airlines account for about 50%, and domestic airlines account for about 20%.

As of the end of 2020, the industry has 186 freighters, accounting for only 4.8% of the total number of transport aircraft. In sharp contrast, the FedEx family of the United States has five to six hundred all-cargo planes.

Cargo aircraft scale of major airlines. Image source: Civil Aviation Resource Network

Due to the limited production capacity of new cargo planes, it will take at least two years to manufacture and deliver them, and China currently does not have the ability to produce large planes, so most cargo planes rely on second-hand passenger-to-cargo planes. However, there are currently a small number of refitting factories in China. Due to multiple factors such as a long refitting cycle and high refitting costs, the capacity of second-hand passenger-to-freight planes is not optimistic. This shows that there is a huge gap between China and international transportation in the international transportation industry.

In addition, the belly cabin capacity of passenger aircraft is also an important part of global cargo transportation. According to statistics, the international proportion is 49%-50%, and the domestic proportion is 82%. However, in November, the Civil Aviation Administration held a "passenger-to-cargo" flight operation promotion meeting and stated that starting from January 1, 2022, only anti-epidemic-related items will be allowed to be loaded in the passenger cabin. The carrier will establish a whitelist system for cargo to make it clear The name of the anti-epidemic materials that can be carried.

At the same time, the new regulations also require that cabin seats cannot be removed to increase cargo space. Airlines that have been removed or are undergoing modification projects should be restored to their original configuration. This standard means that the available air cargo capacity, which is already in short supply, will be reduced again.

China's air transport relies heavily on the belly compartment of passenger aircraft. Apart from the belly compartment of passenger aircraft, China's all-cargo aircraft transportation lags far behind the international level. To catch up with the international level, domestic air transport still has a long way to go. Therefore, under the special circumstances of the epidemic, no matter how the demand soars, the supply of cargo aircraft will not be able to increase rapidly in a short period of time, and the supply of capacity will remain tight.

This is also the fundamental aspect of the industry. Cross-border e-commerce and logistics service providers must face reality, make arrangements in advance, create diversified logistics solutions, and try to avoid putting eggs in one basket.