Enterprises perspectives for containers dilemma

Edited by Zhong Mengxia

Since this year, the impact of the pandemic has led to a surge of sea freight, which has caused a greater impact on domestic textile exporters. China's foreign trade is facing an increasingly container shortage, the goods of the merchants are ready, but there is no shipping space. Theis leads to a series of unexpected extreme situations in the field of foreign trade shipping, such as lack of containers, filled to capacity, throw off the cabinet, super expensive freight, book containers by drawing lots and other unprecedented phenomena frequently exposed, become the biggest problem for those foreign trade enterprises.

Due to the impact of the pandemic in the first half of the year, the global blockade, coupled with a lot of overseas warehouse replenishment at the end of the year, the import and export boom, leading to all containers got stuck in major ports. Thee ports are full of boxes, and the congestion is serious.

Thee containers that go back cannot be shipped back, which directly leads to the serious shortage. China returns only one container for every three it exports, according to the China Container Industry Association. Serious domestic containers' shortage leads to a large number of foreign trade factories began to limit their own production; but a large number of empty containers have piled up overseas, causing the port to be blocked.

Prices for both old and new containers are soaring as shipping lines hold on to their containers for longer than before. While used Chinese containers now sell for between USD 2,300 and USD 2,600 on the market, new container prices have surged 64 percent this year to an average of USD 3,390.

Shipping a standard 40-foot container from Shanghai to Los Angeles costs USD 10,377, nearly 67,000 yuan, up 329% from the same period last year, according to the latest data from World Container Index.

Freight jump puts enormous pressure on corporate profits. According to Retail Detail, shipping costs for Belgian companies importing goods from China are 10 times higher than before. Nikolas Van der Veken of Fitnessking told a Belgian newspaper, "It used to cost us USD 1,800 to USD 2,200 to ship a 40-foot container. Now it sometimes costs us USD 24,000."

Because of the low unit price of textile exports, the total amount of goods is larger, the impact of rising sea freight to textiles is particularly obvious. At present, sea freight is 3 to 5 times higher than before the pandemic. Container freight to Europe and the United States often accounts for one third or even half of the value of goods. Such high freight is unbearable for importers. In addition, the pandemic has also caused a shortage of shipping capacity, and the shipping schedule is often postponed or even cancelled, which has a great impact on the delivery plan of enterprises, with the delivery time delayed from one week to half a month.

As one of the largest recycled polyester producers in China and even in the world, Yongyin Chemical Fiber, as the subsidiray of Zhongyuan Group was interviewed by CGTN. Since the fourth quarter of last year, the exports of Recoyarns recycled polyester chips and recycled polyester filament have increased significantly, and now the monthly exports are about 2,000 to 3,000 tons. Export countries and regions include South Korea, Japan, Taiwan, Vietnam, India, Malaysia, Pakistan and Turkey, Egypt, Honduras and other European and American countries.

Zhongyuan Group started its export business in 2019. Located in Qidong, east China's Jiangsu Province, the company exported 1,000 to 2,000 tonnes of polyester every month before. But in recent months, orders from countries like Vietnam, India and Honduras dropped dramatically due to rising logistics costs and container shortage. "Our waiting period for a container has increased from a week to a month. We can also see an increase in shipment costs by three, four or even five times for some regions. Thee shipment costs rise is a major issue for our export business," said Chen Yiren, assistant president of Zhongyuan Group.

One container from China's eastern coastal regions to the UK currently costs about 14,000 dollars. It costed only one-fifth of the price before the COVID-19 pandemic.

Thee higher fees are affecting foreign trade, and the situation is especially severe in the textile industry. Fabrics don't provide as much bang for their buck compared to high-end products, but the cost of containers remains the same regardless of what's inside.

For example, one container of Zhongyuan's recycled polyester yarns cost about 40,000 dollars, but shipment to as far as Honduras account for half of the total goods value. "Theat high rate makes our buyers quite reluctant to purchase our products. Theey either wait to see if the shipment costs will decline, or they just look for raw materials somewhere else," said Chen.

Data from China Customs shows China's export value for textiles recorded a decline of 26.78 percent in July.

Textile exporters are hoping for the best. September and October are usually the "golden period" for the textile industry, as demand for fabric increases due to winter temperatures. But Sun says whether textile exports pick up in the coming months remains an open question, as the pandemic shows no sign of fading worldwide.

Many people expect the global supply chain to remain tight until at least next year. As long as the coronavirus outbreak is not controlled evenly, it is unlikely that the marine industry will fare better, according to transportation economists.