By Arthur

Port congestion and delay in shipping is the objective of high ocean freight.

I was thinking the reduction of container volume caused by the industrial power ration began at the end of September in China could slightly ease the global port congestion, especially in the United States. However, so far there is no sign of slowing down the port congestion in US ports. The number of ships waiting for berths at the port of Los Angeles continues to increase. It is said there have been more than 80 ships. According to media reports, many container ships lined up to enter ports. In the waiting time, more than 3 million TEU of transportation capacity has been wasted. Approximately equivalent to 12.5% ​​of the global capacity. This wasted capacity has exceeded almost 12.2% of the total capacity of the world's third largest shipping giant CMA CGM, which is equivalent to 3.5 times the capacity when Hanjin Shipping closed in 2016. This is quoted from a report by the British shipping media Lloyd's List. Take the trans-Pacific route (Asia-US route) as an example, although more ships have been put into use this year, the actual capacity that can be loaded is reduced by about 20% a year due to the impact of port congestion. This can also explain the insanely high ocean freight caused by, in addition to the relatively low input of ships and insufficient empty containers at the beginning of the year, the continued port congestion starting in May, especially the US ports. Statistics pointed out in August, the turnover rate of a container is 1.8 times a year. The turnover rate may be lower now. Not to mention that since the beginning of the year, Chinese main empty container manufacturing plants have been fully operational and have been able to produce 500,000 standard containers per month to supplement the shipping market, which is estimated to have increased by 6% compared to last year’s containers. Ships and empty containers have been added to the market in an appropriate amount, but due to the port congestion, the entry of laden containers were delayed and empty containers could not be delivered inland. The port space were full, blocking each other's access paths. I have already explained the causes of congestion in American ports in the last article. So far, the situation has not improved.

Beginning before the Chinese National Day holiday (October 1st), due to the emergency launch of the industrial power ration policy, some goods were too late to be produced, which led to sudden cancellation of many # 40,#41-week space bookings. The shipping market suddenly dropped sharply before October 14th. The shipping industry insiders pointed out that the market news recently showed the freight rate from China to the Western US route dropped by more than 30%. Although the freight rate of the Shanghai Export Container Freight Index SCFI before China long holiday stopped rising for 20 consecutive weeks, the decline was limited. The SCFIS settlement index remains high. According to industry analysts, the main reason for the sudden drop in freight rates is not directly related to shipping lines. It should be that freight forwarders pull out their reserved space. The major shipping lines are still in full, the price and volume have not fallen, and there are many cargoes still waiting to be shipped. Many of the large auction space come from small lines such as CU Line, TS Line, and there are also freight forwarders who blocked for e-commerce packages and master contractors  who specialize in selling space on behalf of carriers, which is also commonly known as shipping scalpers. Master contractors sell space mostly to co-loaders at market real-time prices. Without warming, the factory was unable to produce in time and there was no cargo ready for move, so contractors had to clear their space within the time limit to reduce losses.  It is easy to see that part of the crazy high prices in the past was also caused by the shipping scalper supply chain.

These master contractors, it is said that each FCL earned at least more than US$6,000 astonish profit a container. However, who gave these big dealers space and such low prices? The answer is indispensable to the shipping lines. This is a shipping scalper supply chain. Different shipping lines support their own specific big bookmakers, and give FAK or premium prices space (the prices of these spaces are far lower than the real-time market price!). The big bookmakers then distribute to their secondary mid-market dealers, and the mid-market dealers then hand it over to the scalpers on ground who are active in the market to sell to their peers. Beside the space protected to certain amount for their BCO contract customers and small amount to NVO freight forwarders,  the remaining space from shipping lines can be imagined to hand over to the shipping scalper supply chains to distribute high-priced real-time market. The upstream and downstream participants in the supply chains must sell from the original FAK and Premium prices at marked up. Each dealers have to keep on adding certain profit, which has created the crazy shipping price for more than half a year. A question bring up for whether the shipping lines have additional profit by such selling game ?  You may figure out by you own. The shortage of market capacity caused by port congestion and ship delays is an objective fact of high prices. At the same time, the shipping scalper supply chains are another high price drivers. In fact, where there is demand, there is supply. This is the iron law of the free market. The current shipping market is a "seller" market, so the supply side are the price makers. The higher the demand, the greater the room for price increases. The more players participating in the scalper supply chains, the more often they sold to next buyers then more profit added on top, and the higher the price will accumulate. The final buyers have to take the painful high price space to move the freights. This is the same as the antique market. If it is a uncommon item, the more it sold to new buyers, the higher the market price. To stop this kind of market situation of chasing high ocean freight pushed up by scalper supply chains, only way is to solve  the port congestion problem thoroughly.

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