• China-Brazil freight skyrockets and should make imported products more expensive

    Freight prices have risen since October, with the global recovery of the economy and increased demand for Chinese products.

    https://www.portosenavios.com.br/ – Sea freight on the China-Brazil route soared. The cost of imports was already on the rise in the last quarter and this week reached a level considered unprecedented of US $ 10,000 per TEU (standard measure used for containers), according to importers and shipping companies.

    ‘It is a historical level, I have never seen freight reach this value,’ said Luigi Ferrini, senior vice president of Hapag-Lloyd in Brazil. A year ago, the cost of this same route was in the range of US $ 2 thousand per TEU.

    Freight prices have increased since October, with the global recovery of the economy and the greater demand for Chinese products, says Rafael Dantas, director of the importer Asia Shipping.

    The surge also occurs on other routes from China. The trips from Asia to Europe and the United States reached values ​​above average, with more than US $ 4 thousand per TEU.

    The price increase is mainly the result of logistical problems and the large gap between supply and demand over the last year – a ‘perfect storm for global container flows’, according to Centronave, which represents the global shipping groups long haul in Brazil.

    ‘When the pandemic broke out, many companies stopped placing orders, there were dozens of travel cancellations [by cargo ships]. But demand for products did not fall as expected. The expense that would go to travel was for items from home, home office. Local consumption increased worldwide, and there was a lack of products’, summarizes Ferrini.

    At the height of the Brazilian pandemic, between March and July, 23 ship trips from China were canceled. The number is equivalent to at least five weeks without container imports from the country.

    In the middle of the year, it became clear to companies that it would be necessary to resume orders. The increase, however, coincided with the resumption in Europe and the United States, leading to a fierce dispute over containers and vessels. Today, virtually all ships available in the world are in use, says Centronave. Result: freight rates skyrocketed and, even after Christmas, they continue to increase.

    The situation is aggravated because the pandemic has also reduced the efficiency in releasing cargo in ports, terminals and warehouses, which also suffered from social isolation measures and the strengthening of health surveillance protocols.

    To try to ease the bottleneck, between October and December, shipping companies added 14 ‘extra-loaders’ (additional ships), which increased the capacity on the Shanghai-Santos route by about 14%. The increase, however, has not been enough to meet demand. In the week of Christmas, Cargo registered US $ 7,184 per TEU. Seven days later, it was already $ 8,173. Now, shipowners and importers say prices have reached the $ 10,000 mark.

    The increase could affect several sectors that depend on Chinese imports. This is the case, for example, in the electrical and electronic products industry (mainly portable and brown products). The largest companies in the sector, which work with annual contracts in maritime transport, reported readjustments of 90%, according to the National Association of Manufacturers of Electro-Electronic Products (Electros). The smaller ones, which make sporadic imports, pointed to a 200% increase in cost.

    In the case of large fashion retailers, which import most of their winter collections, the more expensive freight will have a direct impact, as orders for the cold season start now. ‘It is difficult to insure shipments due to the high prices, because it is necessary that the items arrive in time for the winter. As 2020 was a tough year, it will also not be possible to insure the transfer of costs in the final price’, says Edmundo Lima, executive director of the Brazilian Textile Retail Association (ABVTEX).

    For Dantas, from Asia Shipping, another aggravating factor is the concentration on maritime transport, composed of large global groups. ‘After years of crisis, companies started to share operations, exchange information about the market. This consolidation undoubtedly contributes to higher prices’, he says.

    Another expert points out that, in other regions, such as in Europe, the surge in freight is already a cause for questioning in competition defense agencies.

    Ferrini counters criticism and says that the concentration of the sector was only due to the failure of some companies, which were in a fragile situation after years of crisis and reduction in applied tariffs.

    Centronave says that the surge in prices is the result of a combination of atypical factors, resulting from the pandemic and pointed out that the capacity of companies to expand the offer, to reduce freight, is nil: the global idleness of the fleet is 1.5% (against 10.6% a year ago). In addition, the association says that the price increase affects only the spot market (with immediate negotiation) and estimates that between 40% and 50% of imports from China to Brazil are governed by annual contracts, with more stable freight.

    In the market, there is still a lot of uncertainty about how prices will behave in the medium term. Centronave believes that freight will return to normal throughout 2021. For Ferrini, the prospect is that it will remain high for another two or three months. Asia Shipping projects that prices will drop from the current record but remain above $ 4,000 per TEU.

    Source: Valor Economico

    See original article at: https://www.portosenavios.com.br/

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