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Outrageous! Freight rates have soared! High freight is also difficult to grab shipping space
May 10, 2024|
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Freight forwarers are warning customers that demand for sea freight between Asia and Europe is starting to look similar to the peak of the pandemic.
One UK forwarder said the speed and pace of the change had been astounding, revisiting the tensions seen at the height of the pandemic. The forwarder warned that shipping companies were cancelling FAK rate quotes when booking space and were also cutting contracted capacity.
"The current situation is a nightmare for importers," the forwarder described. "Demand has climbed and our customer base has grown by 10-20% year on year. "Either customers are restocking, or an additional two weeks of transport buffer stock is needed because of the long transit times around the Cape."
Scan Global Logistics also issued a warning to customers that rates for westbound shipments in Asia were "skyrocketing". Continued capacity needs, blank sailing schedules and pessimistic forecasts about the prospect of a Red Sea crisis have combined to drive rapid increases in ocean freight rates, the company said.
Shipping companies are implementing peak season surcharges and GRI for "long and short term contracts", and Hapag-Lloyd, Mediterranean Shipping and CMA CGM have all announced increases in sea freight rates from the Far East to Europe. However, the British forwarder said the quoted rates were quickly withdrawn because they had been replaced by higher prices.
In addition, freight forwarders also mentioned that multiple shipping lines have shut down FAK and spot space booking mechanisms due to tight markets and shifting strategies of shipping lines, which will not reopen until June or later. This means that even those willing to pay higher freight rates may not be able to book space in time, which further increases tensions in the freight market.
Unrelated routes have also been affected, with rates on routes from Asia to Latin America rising sharply to $9.000 to $10.000 per 40 feet and capacity being shifted to more profitable routes.
In addition, contract and spot rate levels began to diverge, with long-term contract rates far from short-term rates, in some cases more than $3.000 per 40 foot DC. Shipping lines are increasingly prioritizing and loading higher-revenue cargo to mitigate the dismal financial results of 4Q23 and, to some extent, the mediocre results of 1Q24.
Containers are in short supply and prices are climbing
Part of the problem also stems from a shortage of containers. Customers of Container Xchange said that while inventory levels were not putting significant pressure on warehouses, container prices were "continuing to climb, adjusting roughly every 48 hours". This is mainly due to uncertainties related to the Red Sea situation and the desire of suppliers and sellers to hedge risks.
Prices for a 40-foot container have climbed from $2.200 - $2.300 in April to $2.500 - $2.700 currently. The Cape Bypass absorbed a "significant number" of containers and a significant number were stranded locally. Due to high transportation costs, relatively low storage costs and the fact that the containers themselves are nearing the end of their useful lives, it may not be economically feasible to ship them out.
Scan Global asked clients to "understand" the current difficulties, which it expects to continue until May. The UK freight forwarer further stressed that the new capacity had not had a positive impact on the current woes, nor on the return of containers to Asia.
The company warns that this is only the beginning of an explosive growth in capacity shortages and shipping moving further north, and that even paid participation may not save the crisis. At the same time, however, the firm noted that demand could fall as fast as it grew, predicting that markets would fall faster than they rose after China's October Golden Week holiday.
HMM levies Asia to North America, Mexico GRI
From May 15. 2024. HMM will implement the new GRI for services from all origin locations to the United States, Canada, and Mexico. The same as the previous standard, according to HMM's latest announcement from June 1 the same standard. Details are as follows:
Please consult the corresponding shipping company for details of the levy. Other shipping companies may also take similar measures to increase the freight.
Although it is still the traditional slow season of the shipping market, and the shipping company's price increase announcement is mostly expected behavior, but since April, a wave of "price increase tide" shows that the consolidation industry has the confidence to raise prices, and is unwilling to accept the status quo of low freight.
