Asia market update; June

The Asia export trades are now as challenging as it was during the pandemic, with extremely tight vessel space, equipment shortages and port congestion colliding leading to a surge in spot rates, with analysts speculating it could reach USD 20,000/FEU on the Asia-Europe trade before too long.

Vessel schedule reliability is slipping, dropping below 50% on Asia-Europe and Asia-US East Coast trades in April, with further deterioration expected across all trade lanes.

Compared to a year ago, spot rates on the major Asia export trades are up significantly. For example, Asia-Europe +300%, Asia-US West Coast +200%, Asia-Mediterranean +200% and Asia-US East Coast up almost 150%.

The level of weekly increases is not slowing with week on week increases of between 10-20% now a sustained pattern with no sign of slowing.

There are several factors driving the rate increases, but the speed of change has created nervousness in the market, generating more demand and ‘highest bidder’ pricing.

Typically, retailers start importing goods for the November Black Friday sales and Christmas shopping season between late summer and autumn, but having experienced the pandemic’s capacity crisis, they are front-loading orders, fearing that there may be a capacity squeeze during the Q3 peak season.

This report by the BBC – ‘Shops rush for Christmas stock as shipping costs surge’ – confirms that retailers are placing orders early, as soaring costs and disruption threaten their supply chain deliveries.

One business told the BBC that increased costs were likely to feed through to the price on the high street and they were having to plan and book well in advance to make sure their Black Friday and Christmas stock arrive on time.

And even though it impacts cashflow and creates warehouse capacity challenges as they must store the goods for longer, they can’t risk ordering later, and potentially paying even higher freight rates or risk not being able to get cargo on a vessel at all.

There have been many articles in the trade press recently, reporting that container shipping lines are restricting allocations to beneficial cargo owners and freight forwarders alike, as carriers try to allocate space and equipment in a market where demand is far exceeding forecasted volumes.

We note that such reports refer to ‘sources’ rather than cite examples and whilst we are not immune to this, our carrier partners continue to be supportive and the strategic agreements we agreed are still intact, underpinned by strong relationships and decades of partnership.

In the current market we believe communication is paramount and we ask our customers to support us by providing advanced forecasts and early booking. This enables our team to plan and allocate capacity in an optimal way and reduces the risk of not being able to ship as planned.

To learn how we can enhance your ocean freight solutions, please EMAIL our Chief Commercial Officer, Andy Smith.