June rail quotas from China to Europe are almost sold out. Rates from Xi'an are expected to increase in July. due to the reduced number of trains and lower subsidies. Rates from Chongqing are expected to fall by 10%. June 14 Uzbek President Mirziyoyev stated that the construction of the “Uzbekistan-Kyrgyzstan-China” railway could start before the end of 2023. Kyrgyzstan's deputy economy and finance minister stated that the China-Kyrgyzstan-Uzbekistan railway line will be completed by 2026.
Sea freight
We observe a significant slowdown in sea transport, freight rates continue to fall. Shipping giant Maersk took the lead in the price war by lowering its rates from $13 to $1200 per 850-foot container from Asia to the US West Coast. This forced most carriers to lower rates from $40 to $1050. Maersk has been criticized by the industry and this week it revised its rates again to $1000 for a 1100-foot container.
Major shippers predict the market will enter a smaller peak season in July this year, and carriers are likely to try another round of rate hikes. Drewry also expects east-west spot rates on most routes to increase in the coming weeks. The reason for the increase is that the school year starts in September, which requires the purchase of new items, and people are reluctant to buy last year's stock. It is unlikely that there will be a significant recovery in container transport as there is a significant oversupply of capacity compared to demand. According to the latest data from Alphaliner, demand for container transport will increase by 1,4% this year, while capacity will increase by 8,4%, significantly exceeding demand. To stabilize freight rates, carriers must exercise restraint and avoid a price war, but that is easier said than done.
Faced with gloomy prospects for container transport, logistics companies are adapting their strategies. Diversification is one of their key strategies. HMM, for example, is offering $233 million for Hyundai LNG Shipping, hoping to reduce its dependence on container shipping. Maersk is also consolidating its aviation business to reduce the focus on ocean container traffic.
At the same time, many companies list their management and key employees. Salespeople with customer resources have become the target of recruitment for various companies, while rank-and-file employees who do not directly generate profits are being laid off, and this trend is more evident in the case of acquisitions and mergers.
Sea freight rates fell by almost 80% in 2022. In the first quarter of this year, the net profits of major shipping companies also fell by more than 60%.
The increase in the earnings of shipping companies during the pandemic caused them to order large amounts of new ships. However, it takes 2-3 years from production to delivery of a ship, and now that the new ships are ready, the market doesn't need so many anymore. As a result, shipping companies are forced to scrap or sell ships.
Current spot rates:
– Drewry June Rating:
The Drewry Composite World Container Index (WCI) fell 3,5% to $1 per 535,75-foot container per week.
Shanghai-Rotterdam: $1316/FEU, -2% weekly and -86% annually.
Shanghai-Genoa: $2075/FEU, -3% weekly and -82 annually.
– Platts S&P rated for June:
China - Northern Europe： 1100 USD/FEU
North Asia - UK： $1150/FEU
Rail freight
Last week, trains from China to Europe ran almost without delays at the starting stations. The transhipment time at the Alashankou and Khorgos railway terminals on the Chinese-Kazakh border has increased by an average of 10-12 days. However, trains to Europe were not significantly affected as they had priority.
June quotas from China to Europe are almost sold out. Rates from Xi'an are expected to increase in July. due to the reduced number of trains and lower subsidies. Rates from Chongqing are expected to fall by 10%.
Currently, stations such as Xi'an, Zhengzhou and Chengdu have introduced train schedules to control travel times and know when and where to arrive. From June 27. There will be 2 trains per week from Xi'an to Duisburg with an average journey time of 12-14 days, one train from Duisburg to Xi'an every Tuesday and one train from Chengdu to Lodz every Friday with an average journey time of 13 days. The train with the timetable for the entire route was tested last October from Xi'an to Duisburg.
The supply of slots from China to Russia is plentiful, resulting in a steady decline in spot rates, which are now down 10-15% compared to the same period last month. Some regions still have unsold slots to Moscow for June.
From June 17. Alashankou Railway Terminal has already served more than 3000 trains. While the Khorgos terminal handled 3189 China-Europe/Central Asia trains, an increase of 18,4% year-on-year.
June 14 Uzbek President Mirziyoyev stated that the construction of the “Uzbekistan-Kyrgyzstan-China” railway could start before the end of 2023. Kyrgyzstan's deputy economy and finance minister stated that the China-Kyrgyzstan-Uzbekistan railway line will be completed by 2026.
Some reports suggest that Lithuania has been excluded from rail links between China and Europe for political reasons. About 200 railway tracks are expected to be dismantled. Lithuania was once a key country in the Belt and Road Initiative and benefited greatly from China-Europe rail transport. The withdrawal of the China-Europe train from Lithuania is expected to result in a 28% decrease in trade volume (the exact figure, 28%, is unknown).
Road transport
The volume of road transport is currently very low, and the rates are the lowest since 2020. The decrease in the volume of cargo to Russia meant that the road border crossings between China and Kazakhstan are not crowded, and the time of crossing the border is 24 hours. However, trucks from Central Asian countries, Belarus and Russia cannot enter the EU through the Poland-Belarus border. As a result, most fleets choose to enter the EU via the Lithuanian and Latvian borders, with border crossing times of 1-2 days.
Since June, a small number of European customers have started using road transport for time-sensitive goods. Chinese e-commerce retailers have also started using road transport. However, compared to the same period last year, the volume of cargo remains lower.
Truck carriers in Russia and Belarus have shifted their operations east, focusing mainly on transporting goods between China/Southeast Asia and Russia/Central Asia. Eastern European fleets are also shifting their attention to Western Europe, Turkey and other regions. Companies mainly engaged in road transport between China and Europe are actively adjusting their strategies and looking for new opportunities. The future of road transport from China to Europe remains uncertain.
news
(1) Effect of low water on Rhine navigation
The water level in the Rhine typically reaches its lowest level between August and November, but is already low enough to affect commercial activity.
(2) Export from China
At the beginning of June the global average temperature reached an all-time high. Due to persistently high temperatures and droughts in many regions, China has seen strong sales of products such as air conditioners, electric fans and sunscreens. Summer orders, which were previously delivered until the end of June, are now scheduled for the end of August, extending production by two months.
(3) China's GDP growth rate
Several institutions recently revised their forecasts for China's GDP growth rate, reflecting weaker performance after the easing of COVID-related restrictions. The new predictions are as follows:
Goldman Sachs: 5,4% - 6% in 2023
UBS: 5,2% in 2023
Nomura: 5,1% in 2023 and 3,9% in 2024
Barclays: 5,2% in 2023
(4) Chinese cross-border e-commerce
According to data from the General Administration of Customs of China, the total value of imports and exports via China's e-commerce platforms reached RMB 2,1 trillion (approximately USD 294,6 billion) in 2022, up 7,1% year-on-year. In 2022, e-commerce imports and exports accounted for 4,9% of China's total imports and exports. The Customs Survey shows that more than 70% of enterprises expect stable growth of e-commerce imports and exports in 2023.
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