China to UK shipping; worst transits ever, at highest ever cost – and that’s a fact!

If this was a typical year, we’d be approaching the start of the peak season for sea freight and the shipping lines would be preparing a round of general rate increases (GRI), but this year is anything but typical and even with demand soaring way beyond any typical peak period and freight rates already at their highest ever levels, carriers are still preparing more GRI’s, PSS’s and other surcharges.

The lingering effects of the Suez blockage, consistently high levels of global demand (on pretty much every trade lane) delays, disruptions, and limited availability of equipment drove a 9% increase on east-west transpacific container freight rates last week and prices are climbing everywhere.

Negotiations with shipping lines, across the alliances, are inevitably one-sided and, even when contracts are signed, the potential of rolled cargo and broken agreements is increased, as carriers are tempted to take advantage of massively lucrative spot rates on the ‘FAK’ market.

We leverage relationships, built over 40 years, with our primary carrier partners to maintain contract integrity but, inevitably, we have to often overcome the same challenges as our peers, to protect our customers and offer the realistic solutions that are available in the current market of the day.

Some shippers, desperate for space, continue to pay much more than the headline rates, as carriers levy extra charges such as space guarantees, which can easily reach $1,000 per box. This is in addition to the elevated market driven freight rates.

We have seen shippers in the market over recent weeks, with critical deadlines, paying over $13,000 for a 40ft high-cube from China to the UK and it is likely we will reach $15,000 this week. And continue to climb higher…..

Despite schedule reliability hitting record lows on multiple occasions this year, causing immense operational challenges and additional cost, the carriers are insistent on raising prices even further and that’s with Asia-Europe transit times deteriorating dramatically over the past three years, with Yantian, Shanghai and Ningbo increasing an average of nine days since 2018 as illustrated in the table.

When shippers are forced to cancel orders because the freight rates exceed their margins, it is plain that freight rates are too excessive and will result in business failures, at a time when economies need growth. There are and will continue to be increases in consumer product costs and inflation is now inevitable, based purely on the cost of moving product from factories.

And while the transpacific and transatlantic might have been relatively calm over the last week, in terms of price movements, we are expecting to see a new raft of general rate increases on those trades, and spot rates could soar once more, in part to demand and consumer appetite for goods and in part to the actual cost of moving those goods to where they are being sold.

Transatlantic carriers are reportedly preparing a new set of GRIs and/or peak season surcharges, ranging from $500-$2,500 per teu.

Carriers have yet to communicate their GRI expectations on the Asia – North Europe trade, but Hapag-Lloyd are indicating a $3,000 per 40’ GRI on Far East-US trades from mid-June, and with demand in their favour, it is likely they will achieve the increase. These numbers are at eye-popping levels that cannot be sustainable over the longer term.

As more equipment and capacity is introduced, it’s possible we’ll see some relaxation in rates, but with nations, globally, gradually emerging from the pandemic driving demand, which is currently pressured further by carriers blanking sailings to manage capacity, it’s difficult to see the prospect of rates softening anytime soon. This is without the global port congestion, shortage of empty equipment/containers at origins where needed and delayed schedules being considered.

Metro negotiate rate and volume agreements with a wide range of carriers across all three alliances, which means we can access the widest pool of equipment and offer shippers the biggest range of service offerings, port-pairings and rates.

Our fixed validity contracts provide supply chain security and peace of mind, but the best contracts cannot magic empty equipment, which is why we request a minimum of four weeks visibility and booking window, to secure space on the vessel and get the right equipment positioned.

Please contact Elliot Carlile or Grant Liddell to learn how we can support your supply chains, even in the most challenging market conditions.