Why is foreign trade freight high?

As the global economy gradually recovers and international trade volumes begin to pick up, especially in emerging markets and developing economies, rising consumer demand has led to increased demand for international maritime services.

Data from the General Administration of Customs show that in the first quarter of 2024, the total value of China's trade in goods exceeded 10 trillion yuan for the first time, an increase of 5% year-on-year, and the growth rate hit a new high in six quarters.

Tight capacity:

The global shipping market is still in a period of recovery, with limited capacity growth to meet the rapid growth in demand.

The increase in ships detour and transit ports has led to an increase in ships that need to be put into operation, which will lead to port congestion, longer voyages and congestion in transit ports, making it difficult for a large number of ships and containers to complete turnover in time.

For example, due to the continuing tension in the Red Sea, the world's major shipping companies have had to avoid the Red Sea route and rerouting around the Cape of Good Hope in Africa, resulting in a significant increase in route distance and sailing days.

Cost increase:

Rising fuel prices, increased labor costs, and rising port fees have pushed up the operating costs of shipping companies.

Ships are making about 30 per cent more voyages and taking about two weeks longer than before, adding to freight costs.

Geopolitical factors:

Geopolitical events and trade disputes have had an impact on the international maritime market, such as trade wars, port congestion, ship collisions and other incidents have caused some routes to be blocked or delayed, further exacerbating the trend of tight shipping capacity and rising prices.

Imbalance between supply and demand:

The rapid growth in the demand for goods in various countries is in sharp contrast to the tight shipping capacity, resulting in higher freight rates.

The World Trade Organization (WTO) expects global goods trade to grow by 2.6 percent in 2024, with global trade stabilizing and improving, in contrast to tight shipping capacity.

Rising demand for restocking:

The rise in demand for restocking is also one of the reasons for the rise in sea freight prices, especially in the process of global economic recovery, businesses and consumers have to restock demand.