The shipping price is upside down! The price war is coming

Since the beginning of the year, global shipping prices have continued to fall despite the high base in the previous two years, and the downward trend has accelerated since the third quarter. The prices of some routes have dropped by more than 50% from the peak last year.Moreover, due to the high overseas inflation data and the reduction of consumer demand, the current freight rate in the global container shipping market has continued to weaken recently. It even fell below the spot price and appeared upside down!The drop in shipping prices can reduce shipping costs for sellers, and even some big sellers in the industry predict that the inflection point of their profits is coming. But for the upcoming peak season, a sharp drop in sea freight prices may trigger a round of price wars in advance, especially for large-scale products.01 Freight rates in Europe and the United States appear upside downAccording to the data released by the Shanghai Shipping Exchange on September 9, the Shanghai Export Container Freight Index was 2562.12 points, down 10% from the previous period, recording a 13-week decline. The freight rate for exports from Shanghai Port to the basic port market in the West of the United States is US$3,484/FEU (40-foot container), a decrease of 12% from the previous period, and a new low since August 2020. On September 2, the US-West freight rate fell by more than 20%, directly falling from above US$5,000 to the “three prefix”, from US$5,134/FEU on August 26 to US$3,959/FEU.The shipping price is upside down! The price war is comingThe report of the Shanghai Shipping Exchange pointed out that the recent performance of China’s export container transportation market has been relatively sluggish, and the transportation demand lacks growth momentum.A new customer survey from the European digital shipping platform Xeneta shows that if the market conditions change significantly, 70% of the respondents will try to renegotiate the long-term contract, 11% will prepare to default and look for a more cost-effective transaction, and only 18% of the surveyed The cargo owner said that no matter how the market changes, he will continue to fulfill the existing contract.Judging from the August results disclosed by some shipping listed companies, the shipping market is indeed falling. In August, Wan Hai’s revenue was NT$21.3 billion, the lowest level in nearly a year, down 13.58% from the same period last year; Yangminghai’s operating revenue reached NT$35.1 billion, a year-on-year increase of 7% in single digits. Zhang Shaofeng, chief business officer of Yangming Shipping, believes that in May, he was too optimistic about the stabilization of freight rates, and the market downturn exceeded expectations. The container shipping companies are indeed facing pressure from shippers to renegotiate contract freight rates.With regard to the continuous decline in shipping prices, some sellers said that the original agreement price signed by a colleague of a large-scale product with the platform has now started to appear upside down, and he can only worry.02 Crazy discounts on big-ticket products”The front desk is selling at crazy discounts, otherwise the goods with cheap shipping costs will enter the market, and the tearing will be even worse.” Some sellers pointed out. One of the effects of the sharp drop in shipping prices is that some sellers of bulky products are stepping up discounts and promotions, otherwise they will be drawn into a more brutal price war later when faced with products that enter the market with low shipping costs.An Amazon seller of large-scale products in Jiangsu told Hugo Cross-border that they encountered this problem, “The shipping fee for the goods sent earlier was high, and it is not profitable to sell.” Now he is also dealing with it at a low price A batch of high-priced goods is expected to be cleared before October.Because the size and weight of medium and large-sized products are generally relatively large, the storage cost of cross-border e-commerce platform warehouses is very expensive, and many of them limit the size of the warehouse. Products that exceed the size cannot be put into the warehouse. Incur additional storage charges.Moreover, during the peak season, both platforms and logistics service providers charge additional peak season surcharges. From October 15, 2022 to January 14, 2023, Amazon will charge peak season logistics surcharges for products that use FBA logistics in the United States and Canada. The average charge per order is about 35 cents. The specific circumstances of the delivery order, such as volume and weight, are charged in sections.FedEx also recently announced a surcharge for its peak business season in 2022. Reports suggest this will put further pressure on shippers who have already experienced high bunker surcharges and tight optional capacity this year. Several of the transportation surcharges during the peak season exceeded the level of last year, especially during the peak season, the charges for large customers with more business volume and large packages will be higher. Most of the surcharges will come into effect between October this year and January 2023.03 The inflection point of the seller’s profit may have arrivedAs early as the beginning of August, a seller discovered that an old international express company had started to cut prices. “This is the first time in three years, and the range is quite large. It shows that the market is seriously out of stock.”It was previously reported that inflation and a potential economic recession will have a huge impact on container shipping demand. Statistics show that since May 20, global freight volumes have dropped by 8%, while container bookings have dropped by 36%. Looking at the U.S. market, even though the U.S. is currently achieving full employment, U.S. consumers are under unbearable pressure on economic conditions and personal financial security. Inflation, stock market crashes, rising interest rates and economic instability have all weakened the full employment. Confidence.According to the analysis of industry insiders, the global container shipping market in the fourth quarter is not optimistic, and the market may not be prosperous in the peak season. On the other hand, if the orders of export companies continue to decrease, it may be transmitted to shipping in 1-2 months, and it is estimated that shipping prices will drop further.At the same time, cross-border e-commerce sellers may benefit from this and recover their blood. Yestar Technology disclosed that in the second quarter of this year, the gross profit margin was 26%, which was a year-on-year decline, but a quarter-on-quarter increase of 3%. It is worth noting that Yestar Technology has carried out two rounds of price increases on related products in the past year. In addition, the exchange rate and raw material trends are improving, and the turning point of profitability has appeared.Caitong Securities also pointed out in a recent research report that cost-side factors such as freight have entered a year-on-year improvement cycle since July. The gross profit margin of the big seller Anker Innovations in the second quarter was 40.5%, an increase of 2.4% from the previous quarter, and cost control has improved significantly.

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