Why Is The Global Epidemic Not Over Yet, But Sea Freight Is Rising?

- Nov 20, 2020-

All past, present and future market phenomena and behaviors can be attributed to the interaction of "supply and demand" market forces. When one party's power is greater than the other, price adjustment will occur. In recent years, the continuous rise in maritime charges between China, the United States and central Europe is just the result of the constant search for a balance between supply and demand. What is the cause of the imbalance between supply and demand?


First, China's rapid economic recovery has led to an urgent need to digest domestic production capacity.


Even if the cost increase caused by the rise of sea freight, it can not stop the export trend of Chinese goods. Judging from the growth rate of 3.2% in the second quarter of China, the recovery speed of China's market is too fast. We all know that the manufacturing industry has production, inventory and digestion cycle. In order to ensure the continuity of the production line and the whole supply chain, even if the gross profit rate is low, even if there is a loss, the enterprise will quickly turn over the finished products. Only when the products and funds flow together can we reduce the systematic operation risk caused by the cycle. Maybe many people don't understand that. If you set up a stall, you will understand what I mean. Even if the buyer cuts the price to no profit, the seller will be happy to sell the goods. This is because there is cash flow, there will be opportunities to make money. Once it becomes inventory, it will lose the opportunity of making money and turnover. This is in line with the urgent need to digest the production capacity in China at this stage, and can accept the continuous increase That's one reason.


Second, shipping data support the rise in shipping costs of major shipping companies.


I want to tell you that no matter the shipping company or the airline company, they will not neglect to increase or reduce the freight or increase or decrease the transportation capacity. The pricing mechanism of the shipping company and the shipping company is supported by a set of accurate and large-scale data collection, quantification and prediction algorithm, and they will use the mathematical model to calculate the price Break the price and transport capacity after the short-term market profit margin, and then make a decision. Therefore, every adjustment of ocean freight we feel is the result of accurate calculation. Moreover, the adjusted freight will support the shipping company to stabilize the gross profit rate in a certain period of time in the future. If the market supply and demand data fluctuate, causing changes in the gross profit rate, the shipping company will immediately use the capacity increase and decrease tool to stabilize the profit margin at the forecast level The amount is too large, here can only point to, interested friends can add my friends to continue to discuss.


Third, the epidemic intensifies the intensity of trade war, restricts the import and export of many countries, and leads to the scarcity of transport capacity and the rise of freight.


I am not a conspiracy theorist, but I will deduce many unexpected results on the basis of objective information. In fact, the simple problem of shipping supply and demand is actually rooted in the way countries deal with the epidemic situation and seek the results of internal and external quantitative transformation. For example, India first stopped receiving Chinese goods and conducted 100% inspection of all Chinese goods, As a result, the sea freight from China to India increased by 475% compared with the previous month, and the demand directly shrank, which inevitably led to the reduction of shipping capacity and the balance of supply and demand. The same is true of the rise in freight rates on Sino US routes.


From the fundamental analysis, at present, both the supplier and the demander no longer support the continuous rise of sea freight. You can see that from the beginning of the third quarter, shipping companies have begun to increase transportation capacity, and then it is estimated that they will continue to increase in order to expand profit margins and reduce annual losses, while reducing freight and increasing market demand elasticity. Secondly, we are looking at clients, and generally begin to complain that ocean freight has eaten up most of the product profits. If it goes up further, some of them will not be under supply chain and capital pressure The Export Chamber of Commerce will suspend orders and withdraw from the market temporarily. When the international market demand increases and the price rises, and the profit margin appears again, the market is basically in the early stage of losing power.


At present, because the epidemic situation in other countries has not been effectively controlled and the manufacturing industry has not yet recovered, China's production and manufacturing industry is still in the initiative. Moreover, the rise of sea freight has restricted China's capacity release, affected the normal operation of various industries and affected employment. The state will intervene through policy tools. At present, the shipping companies, international logistics and International freight forwarders have been informed one after another, reporting the recent shipping plans and freight fluctuations and the reasons. It is estimated that there will be significant changes in ocean freight in the near future.