Falling Shipping Costs Ease Pressure on China’s Home Appliance Makers
Wang Zhen
DATE:  Sep 21 2022
/ SOURCE:  Yicai
Falling Shipping Costs Ease Pressure on China’s Home Appliance Makers Falling Shipping Costs Ease Pressure on China’s Home Appliance Makers

(Yicai Global) Sept. 21 -- International shipping prices have fallen by more than half from last year, and even though they are still high compared with before the pandemic, sources in the home appliances industry believe Chinese firms are still eager to invest overseas due to high logistics costs.

It costs about USD3,000 to ship a container from China to the western United States this month, USD5,000 to the eastern US and USD6,000 to Europe amid weak demand, the foreign trade manager at a well-known household appliances maker told Yicai Global.

At the recent peak seen in the fourth quarter of last year, the rate for the US west coast and Europe was about USD15,000 and it was USD20,000 for the US east coast. 

However, “Shipping rates are slightly down compared with the start of this year, but they are still very high compared to the pre-pandemic period, basically four or five times higher,” said the European business head of another established Chinese white goods maker.

According to the Shanghai Shipping Exchange, the China export container freight index stood at 2,609.09 on Sept. 16, having reached an all-time high of over 3,500 in February. The index on Sept. 16 was down about a quarter from February’s peak, but was still over 40 percent higher than in April last year, when it was below 2,000.

“The current decline in international logistics prices and depreciation of the yuan are definitely beneficial for foreign trade exports,” said Zhou Nan, secretary-general of the household electrical appliances branch of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products.

Falling international freight rates should help ease cost pressures on home appliance exports, Wang Jianguo, vice president of sector giant Midea Group, told Yicai Global. Galanz Enterprises VP Liang Huiqiang said the decline was positive for exports and could hedge some of the cost pressure, especially in the second half when overseas demand is weak.

As international logistics prices are still high compared with before the pandemic, Chinese home appliance manufacturers are willing to invest overseas, Zhou said. The firm is expanding production in Egypt, which covers the Middle East and Africa, and is building a new manufacturing base in Brazil. It has also begun work on an air conditioning compressor plant in India, and pushed the integration of compressor companies in Thailand.

Zhou said that although exporters need to pay attention to shipping costs, it is more important for them to improve the supply chain layout and complete their market expansion to cut costs, increase efficiency and boost competitiveness.

Editor: Tom Litting

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Keywords:   Ocean freight,Household electrical appliances