How Should Foreign Trade Enterprises Respond to the Recent Surge in Ocean Freight Rates?

Recently, the foreign trade industry has faced price increases from various shipping companies during the off-season. With freight rates skyrocketing and severe "overbooking," many small and medium-sized foreign trade enterprises are caught off guard and significantly troubled.

1. Why are Ocean Freight Rates Rising?

The fundamental issue lies in the imbalance between supply and demand: a surge in demand coupled with a severe shortage of available space. There are five main reasons for this:

1. Shipowners are detouring via the Cape of Good Hope to Europe, which takes an additional two weeks.
2. Various transshipment ports are unable to handle the volume of transshipment containers in a timely manner, causing port congestion and further delays in shipping schedules.
3. Due to policy impacts, Europe and the US have a strong demand for inventory replenishment.
4. China's strong export of new energy vehicles, with existing roll-on/roll-off shipping capacity unable to meet demand, resulting in the use of containers and occupying some of the available space; simultaneously, it is the peak season for exporting white goods.
5. Shipowners are leveraging the situation by reducing and cancelling voyages, thus decreasing supply and increasing the cost per container.

These combined factors have ultimately led to the sharp rise in freight rates.

2. How Should Foreign Trade Enterprises Respond?

Freight rate trends are difficult to predict accurately due to various influencing factors, including global economic conditions, trade policies, fuel prices, shipping demand, and shipping company operation strategies. However, industry experts suggest that a continuous rise in freight rates seems inevitable in the near future.

The difficulty and high cost of shipping have become major concerns for foreign trade enterprises. With already razor-thin profit margins, the skyrocketing freight rates make survival even harder. This is especially true for small and medium-sized enterprises, which are hit the hardest. They must face the reality of either bearing the high freight costs or watching their goods accumulate and orders slip away. The surge in ocean freight rates has struck like a sudden storm, making the already challenging foreign trade industry even more precarious.

In response to rising freight rates, foreign trade enterprises must adapt to the changes. How can they control costs and solve shipping problems?

1. Diversify Transportation Routes: Consider using multiple transportation modes and routes, including land, air, and different sea routes, to reduce reliance on a single route.
2. Strengthen Risk Management: Lower potential financial losses through purchasing insurance, conducting market research, and performing risk assessments.
3. Enhance Digitalization: Utilize digital tools and platforms to improve operational efficiency, optimize supply chain management, and reduce human errors and delays.
4. Strengthen Cooperation and Alliances: Establish partnerships with peers or other supply chain entities to share resources and enhance overall risk resistance.
5. Customer Communication and Trust: Maintain close communication with customers, promptly convey transportation status and potential delays, and build trust and understanding.
6. Policy Support and Utilization: Pay attention to relevant government policies and leverage various support measures provided by the government, such as tax incentives and financial subsidies.
7. Long-term Strategic Planning: Consider geopolitical risks in strategic planning and develop flexible response strategies to adapt to the constantly changing international situation.