The China-Europe container crisis has escalated over the past week, with container prices reaching new highs, while the container availability in China remains at record lows. China’s exports recovered progressively from the COVID-19 pandemic, and after a pause caused by lockdown measures in Europe, demand has increased, but delivering goods overseas has become difficult due to increasing shipping costs.
The container freight index by Shanghai Shipping Exchange has climbed to 2048.27 last Friday, more than double as compared to April (855.34). However, in practice container rates are considerably higher and changing on a continuous basis. Market insiders report container prices from China to Europe reaching 7.000 USD in Antwerp, Genoa & Hamburg (some Germans even reporting paying 8.000USD) with the risk of further increases before Chinese New Year. Prices are lower on routes to Poland (4.700USD).
The problem of availability & prices on shipping lines is moving the focus of traders to land routes, however the capacity on China-Europe railway services is near to full capacity. Some shippers consider overland trucking, which is normally faster than trains, but trucks are stuck at some borders and lagged by traffic. Some Italian importers said that they are currently paying for shipments from China to Italy around 2.500 US$/truck.
The container crisis is also putting pressure on exports of wood products to China.
Some Chinese importers complain that their European suppliers are still under negotiation with their logistic companies, however the estimated increase for beech logs imports is around 10 euros per cubic meter. For spruce logs imports the estimated price increase is around 15 to 20 US$/m3. Some French log exporters complain that the export of spruce and ash logs has become nearly impossible. Prices for containers varied widely (1.200-2.300 USD for 40ft) between exporters contacted but in all cases increases are substantial.
From South America news aren’t better. Sea freight from Brazil to China is at the roof and it is difficult to get containers. Normal prices from Brazil to China ports are around US$ 1200- 1300/container. Today, the prices have gone up to 1700/ container for shipments to China.
Container availability and pricing issues are moving to all other shipping lanes. For example container prices from Antwerp to Pakistan are also rapidly moving. Prices of 1.350 USD for 40ft in Sept are now around 1.825 USD.
Containers from Indonesia to Europe also passing the 5.000 USD mark for 40ft. In Vietnam prices are now reported between 5.000 and 7.300 USD for 40ft.
In all markets parts of the volumes of containers have been booked by intermediaries speculating on further raises. This also explains that the market is looking more and more like a spot auction.
Market players are only starting to grapple all the spill-over effects of this crisis on the supply chain. Factories in Asia need to decide if they curtail production and/or find storage space for goods that can not be loaded. They also need to start reviewing their raw material availability for the next months based on expected loadings. Importers of transformed products need to think of how to pass on cost increases in a market that will be hit by large availability issues of goods.
The big question is how long these shortages will last. China announced that it will increase the supply of containers and tighten monitoring of the shipping market to further stabilize the rising logistics costs in international trade, a government official said last Thursday. The Chinese Commerce Ministry announced that ”it will continue to work with related parties to provide more containers to the market, speed up the turnaround of containers, and help container manufacturers to expand productivity,” the official said.
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