Digital ocean freight rates specialist says surcharges have elevated prices well beyond the record levels indicated by the Shanghai Shipping Exchange, further confirming anecdotal reports from forwarders.
Shippers are reporting spot rates of US$10,500 per FEU to move containers from China to European main ports, according to digital ocean freight rates specialist Xeneta, which says surcharges have elevated prices well beyond the record levels indicated by indices such as the Shanghai Shipping Exchange (SSE).
Xeneta said the figures from its rates platform indicated that “in reality, the market is 20% higher to move cargo”, for example on transpacific eastbound lanes, than indicated by other industry indices such as the SSE’s SCFI and CCFI indices.
Xeneta said it was “analysing all rates coming into the platform as many shippers are preparing for RFQs. Our shipper customers are reporting unprecedented rate and surcharge levels not being reported. Many are outlining troubles to move intra-Asia cargo due to capacity constraints on Europe-Asia.”
Meanwhile, the latest update this week from digital rates specialist Freightos noted that “after the moderate up and back down of ocean freight rates on the transpacific in the last few weeks, prices climbed dramatically this week, driven by the continued strong demand and boosted by the lead up to Chinese New Year (CNY) in February”.
It highlighted that Asia-US West Coast rates had again breached the $4,000/FEU mark on a 10% gain, while prices to the US East Coast spiked 21%, “bypassing the $5,000/FEU milestone to $6,022/FEU”. It noted that backhaul rates also continued their climb, with prices on both lanes increasing 55% so far this month.
It said prices from Asia to North Europe and the Mediterranean “climbed a more moderate 4% and 2%, respectively, though both are well above $7,000/FEU before surcharges that make the actual cost much higher”.
Judah Levine, research lead at Freightos Group, noted: “Though capacity on these lanes is essentially booked up until after Chinese New Year anyway, some shippers of low margin goods are reporting being priced out of the market. And reports of postponed orders sitting in already-loaded containers can’t be helping the global equipment shortage, which is also leading carriers to simply skip certain port calls where too few loaded containers are available.”
In response, China’s Ministry of Transport had pledged greater scrutiny of carrier pricing and surcharge practices this week, Levine noted.
Early Chinese factory closures
“There are mixed reports of some manufacturers in China planning to close early for the holiday since goods can’t be shipped anyway, and others planning on staying open to keep up with demand, and this uncertainty may be part of why carriers haven’t announced many cancelled sailings over the holiday yet,” Levene added.
“The existing backlog of volumes, as well as whatever additional pressure is created over CNY will take time to clear, and – together with the expected additional stimulus from the Biden administration – could keep demand high and equipment scarce well into the spring. This push would leave only a couple months of possible downtime before this year’s peak season uptick in July.”
Earlier this week, Lloyd’s Loading List reported that the squeeze on space and record ocean freight rates on the Asia-Europe trade lane were showing no sign of abating in the run-up to Chinese New Year (CNY), with further rate hikes now expected later this month and the real prices paid by customers soaring to unprecedented levels. This report highlighted that spot rates from Asia to Europe spiked again last week on equipment shortages, port delays and lack of capacity ahead of CNY factory closures in Asia from mid-February.
According to Drewry’s assessment of the World Container Index, Shanghai-Rotterdam rates jumped 34% last week to $8,882 per FEU, up 282% compared to a year earlier. Spot freight rates on the Shanghai-Genoa lanes meanwhile gained 18% last week or $1,282 to stand at $8,380, up 212% compared to a year earlier.
And it highlighted that securing slots before CNY was now proving a ferocious battle ground for forwarders and shippers. “Lines are asking for premiums to guarantee slots and equipment far above standard rates,” one Shanghai-based forwarder told Lloyd’s Loading List. “Carriers might honour contracted [rates], but unless you’re a huge BCO [beneficial cargo owner], that won’t be until March.”
Real, all-in costs
Sources suggested to Lloyd’s Loading List that the real, all-in cost of moving a box from China into North Europe before CNY was now costing those unable to delay shipment up to double the index spot rates published by Drewry and Shanghai Shipping Exchange.
“Anything we don’t need urgently we’re scheduling for March instead and advising customers to delay as much as possible until the heat goes out of the market,” said one Europe-based forwarder.
Hong Kong-based Pat Liu, sea freight manager at BEL International Logistics, told Lloyd’s Loading List that some carriers were honouring contracts if they had slots available. However, availability was “very, very tight to extremely critical” with “space confirmation based on past performance” and additional spaces only available on payment of a premium – and even then only after a “case-by-case review, which is similar to a bidding approach”.
Schedules disrupted
He said shipping line schedules were currently widely disrupted by congestion, prompting further supply chain confusion as carriers omitted calls or re-routed vessels to catch up with schedules.
“Besides the normal overbooking, equipment shortages at Hong Kong/China ports are intensifying the situation,” he told Lloyd’s Loading List. “Rollovers are also more frequent.” He said the space squeeze and equipment shortages would likely continue until after CNY.
Flexport said further rate increases were likely with carriers expected to follow up 1 January generate rate increases (GRIs) with fresh hikes on 15 January. The forwarder is recommending advance booking notice of at least 21 days prior to Cargo Ready Date (CRD).
“Rates have increased significantly during December and the first half of January,” said the forwarder. “They will continue to go up in the second half of January.
“The severe equipment shortage has not improved and will be a major challenge through CNY. It is still necessary to be flexible on equipment substitution. Urgent shipments should be booked on premium directly, as even premium offerings have become more limited.”
Flexport added: “There are widespread restrictions for UK cargo due to port congestion and haulage limitations and there will be further delays and port omissions. Shipments from feeder ports in China should be diverted to main ports instead.”
Source: Lloyd´s
