Source: China Trade News Author: Jiangnan 2022-10-28 09:31:10
As an intermediary between shippers and carriers, forwarders have not had a good time lately. The “falling and falling” of sea freight rates, the reduction of freight volume, and the low degree of digitalization have become difficulties faced by “middlemen”.
“Driven by the global market environment, the international freight forwarding industry is likely to usher in a round of large-scale consolidation.” Industry insiders interviewed told this reporter that as China transforms from a trading country to a trading power, the freight forwarding industry will continue to improve its service level in the competition, and continue to move towards high-quality development, digital transformation and standardized services.
Shipping prices in two years
Freight forwarders change from finding ships to finding goods
Generally speaking, the third quarter is the traditional peak season for global maritime container transportation, and the price will also “rise and rise”, but this year’s “peak season is not strong”, but the price of the world’s main shipping routes has “fallen off a cliff”. According to the Baltic Freight Index, as of the end of September, the Baltic container sea freight rate decreased by 63.8% compared with the same period last year, of which the freight rate of the China/Far East-North America West Coast route fell by 85.7% from the highest freight rate level last year.
After the National Day, the shipping price did not improve slightly. On October 21, the latest Shanghai export container composite freight index released by the Shanghai Shipping Exchange was 1778.69 points, down 1.9% from the previous period.
“From the madness of ‘one box is hard to find’ to the fact that there are more ships and less cargo today, in the past two years, freight forwarders have been riding a roller coaster.” Wei Feng, general manager of Jiangsu Meishi Supply Chain Management Co., Ltd., recalled in an interview with China Trade News that last year’s shipping was too crazy, and the price generally soared, and the sea freight of a container was basically more than 10,000 US dollars. Many customers take the initiative to find them to inquire and book space, and when it is hot, it is really “difficult to find a box”. Since the beginning of this year, with the collapse of shipping costs, their main work has changed from finding ships to finding goods, from only being an export freight forwarder to mainly transferring to import through export in the near future, forming a closed loop of import and export chain.
Recently, some short-sea routes have even experienced “zero” freight, that is, the basic sea freight is exempted, and the cargo owner only needs to pay fuel surcharges, terminal operation fees, customs clearance fees, storage fees, delivery fees, etc.
“The sharp fluctuations in freight rates reflect the results of supply and demand and market games. In addition, freight rates are also affected by factors such as the new crown pneumonia epidemic and the Russia-Ukraine conflict. In the view of Li Linhai, secretary general of the Shanghai International Freight Forwarding Industry Association, freight forwarding companies will inevitably be affected in the short term, including turnover and profits.
What’s more, disputes in the freight forwarding and logistics industry, explosions and other incidents have also begun to appear. According to the “Notice of Situation” issued by Shenzhen Kunxin International Freight Forwarding Co., Ltd. on October 18, the company received a booking commission from a supply chain enterprise in Shenzhen in January 2022 to transport 11 cargo totaling 14 container containers from South China to Japanese ports. However, when the port was inspected by Japanese customs, it was found that the declaration of cargo information did not match the actual situation, and 14 containers were finally seized. As the destination port has not picked up the goods, as of October 15, it is estimated that the container overdue usage fee and storage fee have reached 1.943 million yuan. In order to stop losses in time and minimize expenses, Kunxin International Freight Forwarding Co., Ltd. proposes corresponding solutions to cargo owners.
When will ocean freight reach bottom?
HSBC pointed out in a new report that sea freight is likely to fall to the level of 2019 by the end of this year, and the Shanghai Container Freight Index (SCFI) will bottom out in mid-2023.
“In the future, the trade center will continue to shift to Southeast Asia, China’s industrial structure will be further adjusted, China’s status as a major import trade country will be gradually established, transformed into a buyer’s market, and gradually grasp the leading power of international trade.” Li Linhai said that from the perspective of these three major trends, the focus of the international freight forwarding industry in the future is how to seize the opportunities in the Southeast Asian market, and transform the foreign trade delivery mode from FOB mode (consignee booking) to CIF mode (consignor booking), and follow China’s industrial structure to “go global”.
Digitalization “forces” the freight forwarding industry
Shift to integrated services
China is a major import and export trade country in the world. In the past 10 years, the scale of China’s goods trade has continued to rise, and the import and export volume has reached a new high, from 24.4 trillion yuan in 2012 to 39.1 trillion yuan last year. Since 2017, China has maintained its position as the world’s largest country in goods trade for five consecutive years. Among them, about 90% of China’s export trade is completed by container shipping.
Since the second half of 2013, the global economy has slowly recovered from the crisis.
“In the past 10 years, a large number of freight forwarding enterprises have been registered and established in China, accounting for more than 60% of the total number of freight forwarding enterprises, mainly private enterprises.” Zhang Jun, general manager of Fanjia Information Technology (Shanghai) Co., Ltd., said.
The continuous opening up of China’s economy has led to the vigorous development of the international freight forwarding industry. According to data released by the China International Freight Forwarders Association, from 2015 to 2020, the operating income of China’s top 100 international freight forwarding and logistics enterprises increased from 330.47 billion yuan to 535.29 billion yuan, with an average annual compound growth rate of more than 10%.
However, the new freight forwarding companies will naturally have many problems.
“The scale of freight forwarding enterprises in China is relatively small, and most of them have about 50 employees.” Zhang Jun analyzed that compared with major developed countries in the world, China’s freight forwarding enterprises have problems such as scattered service functions, backward operation and management models, low comprehensive service capabilities, and low degree of digitization of information technology.
“Freight forwarders need to provide customers with all logistics and documentation services in the trade process, and the hardware requirements are not very high.” For example, Wei Feng said that there are about 100 freight forwarders in Yangzhou, many of which are mom-and-pop shops, and can be operated by three or five staff members and one or two customers. As long as there is a customer service relationship, you can survive through service.
Zhang Jun told reporters that with the rapid development of digital technology, the information islands in the supply chain have gradually been alleviated, the original industry barriers have gradually been loosened or even broken, shipping companies, e-commerce, retail and other giants have begun to penetrate into the freight forwarding industry, and new formats may soon appear.
Taking liner giant Maersk as an example, it has not only begun to lay out new energy ships, but also gradually extended to both ends of the value chain, such as land transportation, air transportation, logistics business, etc. The six new energy vessels it ordered are powered by methanol dual-fuel, which is expected to reduce carbon dioxide emissions by 800,000 tons per year.
“The involvement of Shanghai cruise companies and the cross-border of e-commerce and retail giants have continuously squeezed the market share of traditional freight forwarders, and at the same time, they have broadened the horizons of freight forwarders.” Zhang Jun said that with the rapid development of networking and digitalization today, it is becoming more and more difficult for freight forwarders to profit from information asymmetry, and they will definitely return to the essence of service in the future. As the development of e-commerce has changed the way of transactions, some freight forwarders see an opportunity and take the lead in extending cross-border e-commerce services, such as Amazon’s overseas warehouse services. The squeeze of shipping companies will force freight forwarding companies to pay more attention to the extension of the supply chain, such as integrated offline comprehensive services.
CICC’s research and analysis pointed out that international freight forwarding has transformed from single-link service to integrated service, and its core competitiveness in the future is reflected in refined control, network coverage and integration capabilities.
Zhang Jun suggested that it is necessary to jump out of the freight forwarder to see the freight forwarder, redefine the freight forwarding from the perspective of the supply chain, extend from the original relatively narrow service space to the deeper user needs, and integrate the loose matching offline operation into a complete delivery service. All of these are inseparable from the digital cross-scenario application capabilities of information technology, which is also the core competitiveness of the freight forwarding industry in the future.
Post time: Nov-01-2022