South American route up 130%! Shipping demand is booming, shipping space can not grab!

The traditional off-season for shipping is now facing a continuous wave of price increases. The latest Shanghai export Container Composite Freight Index (SCFI) rose 9.32 percent to 2,520.76 points, according to data from the Shanghai Shipping Exchange.

 

Specifically, the four major routes rose across the board, the US line rose more significantly, and the most ferocious increases were South America, South Africa and West Africa routes. Shanghai to South America line (Santos) freight 6,686 US dollars /TEU, up 1,225 US dollars, a weekly increase of 22.4%. It is worth noting that the freight rate from Shanghai to South America basic port market has doubled from the beginning of the year (January 5), an increase of 130.47%!

 

Recently, South American airlines can be said to be hot. According to industry sources, the current shipping space to South America is full until the end of June, although some customers are willing to pay a higher price to meet the urgent shipping demand, but there is no shipping space, it is expected that the price will rise again next week.

 

Since the beginning of this month, a number of shipping companies are increasing capacity investment in the South American market.

 

Five leading shipping companies - CMA CGM, COSCO Shipping (COSCO), OOCL, Evergreen and PIL - have jointly launched a new route service between Asia and the east coast of South America.

The new service consists of two separate loop lines, the first of which is operated by 12 vessels and set sail from Tianjin Port on May 5. The second loop made its maiden voyage from the port of Shanghai on May 10 and deployed 13 ships for operation.

 

In addition, Yang Ming Shipping recently announced that it will transform the Far East to the East coast of South America, including updating the existing SA3 service and launching a new service - SA5, effective from the beginning of this month.

 

It is understood that one of the factors affecting the market change is the policy of increasing import taxes on goods such as electric vehicles and solar panels in South American countries such as Brazil. Due to the increase in tariffs, many traders are hoping to ship to South America first to avoid the increased cost of tariffs.

 

According to the website of China's Ministry of Commerce, the Management Executive Committee of Brazil's Foreign Trade Council (GECEX) has decided to impose import taxes on solar panels and reinstate import taxes on 324 categories of related products. Imports of solar panels are subject to a 10.8% MerCOsur external uniform tariff. In order to adapt the market to the new rules, GECEX has set a tax-free quota that decreases year by year until 2027.

 

From January to June 2024, the quota is $1.13 billion; July 2024 to June 2025; The quota is $1.01 billion; From July 2025 to June 2026, the quota is $717 million; From July 2026 to June 2027, the quota is $403 million. For 324 types of products concerned, the tax measures will be reinstated within 60 days.

 

Currently, Brazil has 10.3 GW of installed solar capacity, and 99% of its solar panels are imported from China. Therefore, the earlier Chinese photovoltaic companies export to Brazil, the less tariff restrictions they will face.

In addition, Brazil also plans to increase import tariffs on electric vehicles in a gradual manner, with the tax rate increasing to 35% by 2026, while the zero-tariff import quota will be reduced every year until it is eliminated in 2026. The policy change has led Chinese automakers to ramp up exports, with South America becoming an important market.

 

Brazil's Ministry of Development, Industry, Trade and Services released data showing that in the first quarter of this year, Brazil's passenger car imports rose 46.4% from a year earlier to $1.5 billion; Passenger car imports surged 450% from the same period in 2023. Of that, about 40 percent came from China, mostly electric and hybrid vehicles.

 

At present, the demand for shipping to South America is too strong, and freight rates are likely to remain strong in the near future.