China, which is the world’s third largest and Asia’s largest economy, has a very important role in international trade. China’s export figures increased more than 9 times between 2001-2019. Turkey’s imports from China have increased more than 19 times.¹
China, which is the third country from which Turkey imports the most in 2019, covers the whole country as every year, and the New Year celebration coincides with the date of 12.02.2021 this year. The Chinese New Year is celebrated every year between 21.01-20.02. These celebrations are celebrated not only in China, but also in countries such as Taiwan, Thailand, and Singapore where the Chinese live. In addition, celebrations can be found in areas where the Chinese live heavily. An example would be celebrations in London and New York.
So, what is the relationship between Chinese New Year Celebrations and freight rates?
The duration of this celebration, which includes the whole country and other countries / regions, is 15 days. No loading can be made in China, which is on vacation for 15 days. Celebrations cause companies to prioritize their imports. As a consequence, the increase in prices which began in November has resulted in a spike in prices which have doubled over previous periods.
Due to the increasing demand for Chinese origin products and the factors of the Chinese New Year Festival, ship-owners are experiencing hardware problems during this period. In 2021, an extraordinary event occurred due to Covid-19.
Sea freight prices have increased fourfold for the whole. With the pandemic, question marks emerged in the minds of companies. Considering the problems that may occur due to the pandemic, companies wanted to order much more than their needs in order to avoid supply problems. In particular, the mutation of the virus was also very effective. Another factor was employee problems caused by the pandemic. Within the framework of these conditions, ship-owners started to sell their current capacities at excessive prices. Rising prices were not limited to our country, it affected the whole world.
| What would be the effect of higher prices? With the increase in freight prices, the costs of companies increase. The company can evaluate the increase in costs in 2 ways. The first option is that the company does not reflect the extra costs incurred on the buyers. The second option is to reflect costs on prices.If the company does not reflect the extra costs, then the profitability of the company will decrease and the taxes payable will decrease accordingly.If the company increases the price of the goods it sells, more money will be out of the buyer’s pocket. In addition, the rising prices may cause a decrease in demand. In an enterprise, when the price of products it sells increases, more money is pulled from the pockets of its consumers. In addition, the rising prices may cause a decrease in demand. High prices are not only a problem for purchasing companies. Prices affect the company, government and buyers as well. In addition to these, the fact that some companies do not prefer to load in this environment can cause problems in stocks. If the value of the purchased goods is low, companies do not want to load due to high freight prices, because unit costs seems to be unbearable. Based on our years of experience in this sector, we expect the prices to gradually decrease to normal levels after the festival.However, the postponed imports caused by the excessive numbers that occurred specific to this year may cause an accumulation after the festival. It may take longer this year for freight prices to return to normal levels. ¹ These coefficients were calculated on the property value. |
| References:https://ticaret.gov.tr/data/5f3b925713b876ea88e4c9c4/%C3%87%C4%B0N%20%C3%BClke%20profili.pdf https://tr.euronews.com/2020/06/18/2020-nin-en-guclu-ulkeleri-listesi-aciklandi |
