News / Shippers face 'eye-watering' rates and rollovers as carriers 'cherry-pick' cargo

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Shippers are scrambling to bring forward orders in a bid to mitigate the impact of the longer transit times from Asia to Europe as  vessels are re-routed around the Cape of Good Hope.

However, equipment in Asia is in extremely short supply, due to the delayed backhaul voyages, and container release is being restricted to large-volume ‘VIP contracts’ or shippers prepared to pay a hefty premium.

And even then, there is still no absolute guarantee that containers delivered to the quay will be shipped before the Chinese New Year on 10 February, as carriers cherry-pick much-higher-paying spot cargo and roll over low-rated contracts.

Anecdotal reports to The Loadstar complain of carriers offering “eye-watering rates”, in excess of $10,000 per 40ft, for space on China-North Europe sailings in February.

Nevertheless, Xeneta chief analyst Peter Sand suggests that in the current climate, and until the supply chain disruption is resolved, shippers should not feel comfortable if they are paying a relatively low freight rate.

“Shippers are being told agreements on long-term rates will not be honoured and are being pushed onto the spot market.

“At times like these, shippers should not want to be paying the lowest price, because ocean freight carriers will look at those contracts and deem them lower priority than those agreed on the spot market at higher rates,” said Mr Sand.

Meanwhile, the container spot indices that reflect average short-term rates continue to surge.

This week’s WCI North Europe component jumped by a further 23%, to $4,406 per 40ft, representing a huge 164% since 21 December, while the spot from Asia to the Mediterranean climbed 25%, 166% higher.

Moreover, shortage of equipment and Panama Canal draught restrictions have also driven up transpacific rates, with Asia-US west coast spots gaining around a third in value since the end of December, to around $2,800 per 40ft. And average rates to the east coast have increased 36% since December, to approximately $4,200 per 40ft.

But if carriers get their way, these spot rates will look cheap in a few weeks’ time, with some transpacific carriers rolling out new FAK (freight all kinds) rates, effective from 15 January, of $5,000 per 40ft for the US west coast and $7,000 for east and Gulf coast ports.,

Elsewhere, on the transatlantic, if the spot indices can be believed, nothing much has changed, with for instance Xeneta’s XSI North Europe to the US east coast spot reading actually down 1.5% on the week, at $1,443 per 40ft.

Nevertheless, waiting in the wings for transatlantic shippers are a number of hefty rate restoration and peak season surcharges that will kick in in February, after the 30-day notice period required by US regulators expires.

Furthermore, in the coming weeks carriers will be diverting the maximum amount of empty boxes to backhaul Asia voyages, along with surplus vessel capacity, which will combine to also drive up transatlantic rates.