Chinese aquatic exporters are under pressure to pay high freight rates!
Profits squeezed by soaring freight rates as routes diverted around Red Sea
Chinese aquatic exporters faced a significant increase in transportation costs in May as vessels were rerouted around the Red Sea, according to exporters and news reports. The situation resulted in a severe squeeze on profits.
Container shipping costs from China to Europe rose by 15 to 20 percent, while the cost of shipping to the United States increased by 10 percent, Undercurrent News reported. Cargo shipments from China to Europe are expected to face significant delays as most of the large container ships have switched to an African bypass route instead of going through the Suez Canal.
An aquatic exporter from Hainan province said: “We recently had a phone conversation with our customer and proposed to share the cost. However, in the last few days, the shipping company has again informed us of further increases in freight rates.”
These exporters did not provide a specific cost-sharing proposal. According to a May 20 report in the Wall Street Journal, ships' detours to avoid attacks by Iranian-backed Houthi rebels have pushed global container shipping rates up about 30% recently. Freight rates are expected to rise further as the summer peak season approaches.
“Signs in May pointed to an increase in freight rates, but no one expected the rise to be so significant and rapid,” the Hainan-based exporter said. “Not only are freight rates from Asia to Europe rising, but even the cost of containerized shipping to North America is increasing.”
Some exporters have booked more future shipping capacity in advance in anticipation of new tariffs on Chinese goods that could be imposed after Donald Trump's victory in the 2024 presidential election. Trump has proposed tariffs of 50 to 60 percent on Chinese goods if re-elected.
Based on futures contract prices, industry analysts predicted that high freight costs for Chinese exporters shipping to Europe could continue into October. “I don't think freight rates will go down in June,” commented the head of a Jiangsu-based international trading company in a short video.
“The futures market is betting that high freight rates on the Asia-Europe route will continue into October. The Shanghai Futures Exchange predicts that freight rates from Shanghai to Europe could rise another 35% by August.”
“The third quarter is traditionally the peak shipping season. Congestion in African and Southeast Asian ports could cause delays in the return of Chinese containers, so Chinese exporters should be prepared,” he added.
During the epidemic blockade, freight rates skyrocketed, resulting in extra costs for both exporters and consumers.
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