The pain of pandemic freight rates

There cannot have been many weeks when we were either warning of impending rate increases, highlighting recent increases, or explaining why further rises were likely. And while we have protected our customers from the worst excesses of the lines, this article by Mike Wackett for The Loadstar lays bare the stark reality for some shippers.

In normal times we would report positive market intelligence and the latest news, but those opportunities are less than sparse currently, so here is another dose of the real market as reported in the trade press….unfortunately.

‘I paid ridiculous charges, my cargo still got rolled and the carrier wanted more’

Short-term freight rates from China to North Europe have breached the $20,000 per 40ft mark, while transpacific carriers are quoting rates of up to $25,000 to the US west coast.

And there was one report of $32,000 from Shanghai to Los Angeles being quoted this week.

The Loadstar has seen several quotes from the top five carriers of $21,000 per 40ft for July shipments from Chinese ports to Felixstowe and Southampton, with the average at around $18,000.

Although these massively elevated rates include a premium fee, to guarantee equipment and space, some shippers complain that their cargo is still getting rolled.

“We paid their ridiculous charges and thought that was the end of it,” said one, “but then we found out from our local agent that the boxes were still on the quay and the line wanted more to ship the cargo.

“Apparently, there was another FAK hike from the next vessel which they insisted on charging, which means their so-called premium fees are worth nothing,” he added.

And as the peak season approaches, it appears the situation is about to get even worse for shippers to Europe and the US.

They will need to brace themselves for another round of FAK and GRI rate hikes on the 1st July, with yet another hike likely from the middle of the month and a PSS [peak season surcharge] of several thousand dollars.

One UK-based NVOCC told The Loadstar this week that a “curt email” from his carrier advising of a new increase was “the final straw”.

He said: “We have supported them through thick and thin, even when their standing was pretty low in the industry, and this is how we get repaid.”

On the transpacific, shippers are suffering similar problems. Jon Monroe, of Jon Monroe Consulting, said carriers had the ability to “manage rates” by rolling cargo, suggesting that the US Shipping Act needed to be updated to include a cap on rate increases and a both-parties damages clause for non-fulfilment of contract.

Meanwhile, Craig Grossgart, confirmed to The Loadstar that one shipper had been quoted $32,000 this week for the shipment of a 40ft container from Shanghai to Los Angeles.

“To be honest, I think it was a polite way of the carrier saying to the customer it doesn’t want to take its business,” said Mr Grossgart.

Nevertheless, he said a figure of $25,000 per 40ft had been quoted to a shipper that needed to move 300 containers from Shanghai and Yantian to Los Angeles next month – “and that is a serious offer”.

With the addition of premium fees, plus a raft of other charges, the gap between the spot market indices and the actual rate being paid is widening by the week.

For example, the North Europe component of today’s Freightos Baltic Index stood at $11,006 per 40ft, while the FBX reading for the US west coast was $6,588.

With strong demand for space and limited capacity likely to extend into next year, we continue to encourage shippers to contact us for all options available which may include the spot market and protect themselves with tailored and specific alternatives, rather than face rates that have risen over 50% in two months and are likely to rise even higher than the current record level, as we enter the traditional peak season for ocean and air freight.

If you have outstanding orders in Asia and are waiting for rates to fall, all the indications are that you will have a very long wait. Certainly up to Lunar New Year 2022 and possibly even after that, which is why we would recommend booking at the earliest opportunity, despite the current high rates. Definitely don’t try to play the market. 

Forecasting continues to be a key ingredient to successful supply chains in the current market and are now needed months ahead of despatch, and not weeks or days as we used to ‘enjoy’. We can only manage cargo movements and your expectations, if we can see them ahead, especially during the critical busy last six months of the year.

Please contact us immediately to receive further updates on a rapidly changing logistics market and arrange a review and discussion on how we can further enhance the movement of your products to market or manufacturing locations globally.