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Retaliatory shipments coming? The 260,000 TEU cargo at Shanghai Port will surge in and the freight rate may rebound!

Date: 2022-07-05

It is estimated that 260,000 TEU cargo will flood into Shanghai port this summer, making the peak season "even more prosperous" than last year.

According to Drury's latest analysis, the pandemic and port congestion have created problems for the global container distribution system, which is "already under severe stress and reduced capacity due to widespread congestion".

At the start of the outbreak, the impact of ship calls on Shanghai ports was modest, but the decline accelerated from mid-April, according to Analysts at Drury

As many as 260,000 teUs of exported goods were not shipped from Shanghai in April due to the lockdown. This is equivalent to 26 ships with a capacity of 10,000 TEU, which could be activated in the coming months as the supply chain restarts.

Shanghai peak season ahead of schedule?

With the launch of Shanghai's unsealing policy, there will be a wave of cargo rush transportation, which will also be a turning point of the spot market freight. It seems that the second quarter will be a weak season and then enter the third quarter of the traditional shipping season, the volume of goods, freight rates have the opportunity to rush high.

It is understood that recently, the daily container throughput of Shanghai port has reached 119,000 teU, back to 90% of normal. The number of freight vehicles passing in and out of Shanghai through the provincial expressway crossing reached 78,000 a day, two-thirds of the normal number

On May 18, Shanghai Customs, based on the actual situation of Shanghai, further proposed 12 measures to support enterprises to expand the resumption of work and production and ensure the safety and stability of the industrial chain and supply chain, in order to help improve the speed of cargo clearance and the efficiency of port operation.

Among them, the application for exemption of late reporting fees and late payment fees due to the control of the epidemic will be processed by classification and batch and those that meet the requirements will be exempted or reduced.

Manufacturing shipments will be concentrated on the back of China's accelerated resumption of work and policy support, adding to delays caused by containment measures. The shipping industry is expected to see stronger demand, when supply chain pressures will increase again, supporting higher rates.

Industry estimates, as soon as the end of May, early June can see the volume of freight boost, the freight market may usher in a wave of upward.

Recently, Shanghai export container freight index also reflects this situation. The latest Edition of Shanghai Export Container Freight Index (SCFI) shows that freight rates on the West American line have recovered from the decline. Last week, freight rates from the Far East to the West American line rose $12 per FEU to $7,900, up 0.15% for the week.

Market participants pointed out that freight rates from the Far East to the West of the United States went up, mainly because Shanghai has been unsealed, part of the cargo has been delivered to the West of the United States, leading to a slight rise in freight rates.

A surge in freight traffic threatens to disrupt global supply chains again

Analysts at Drury said: "The biggest uncertainty at the moment is the pandemic and its' bullwhip 'effect on the whole supply chain. Liner shipping schedules will also need at least one rotation to normalize. This means that even if the outbreak ends now, the predictability and capacity of the container distribution system will be affected during the peak summer season."

In fact, 51 percent of freight forwarders, traders and shippers surveyed by Container xChange expect a surge in freight volume this summer season to have a harsher impact on the global supply chain than it did in 2021.

For example, 58 percent of the respondents said it would be difficult to produce and ship products as planned due to the epidemic, trade imports and exports between Asia and Europe and Asia and the US continued to be restricted and backlogs and unmet demand were increasing.

37.5 percent of respondents said they are "shipping early" in 2022 to ensure customers receive enough inventory. Twenty-five percent of respondents will "use alternative transportation routes and 18.8 percent are entering into long-term shipping agreements with carriers.

In addition, 62.5 percent of respondents said they still rely on the spot market or have not taken any concrete steps to ensure goods reach customers.

The third quarter is traditionally the peak of the year for shipments as retailers build inventory ahead of the fourth-quarter holiday and shopping season. Last year, the increase in cargo volumes led to record high container rates, delivery delays, port congestion and the reliability of container shipping services.

Christian Roeloffs, founder and CEO of Container xChange, said that trade and the economy will resume normal operations after the outbreak is brought under control and shipments will surge as the backlog of goods is shipped.

The combination of these backlogs and peak season orders threatens to clog supply chains at European and US ports where congestion is already widespread.

However, he explains: "Like two sides of a coin, 'need' is the other side to consider. Whether it is GDP forecasts, purchasing managers' indices, rising inflation or consumer confidence, a number of indicators suggest demand may be shrinking. This could help offset the sudden surge in shipments, especially as there are signs that consumers are spending more on services rather than products."

Source (Shipping Information)