News / Carriers are 'price gouging', claim shippers as FAK rates skyrocket

Photo: DP World

Shippers are accusing Asia-North Europe ocean carriers of ‘price gouging’ as FAK (freight all kinds) rates being quoted for January shipment go through the roof.

The Loadstar has been inundated with messages from shipper contacts who just cannot believe the level of rates being quoted by carriers.

“We expected our rates to be increased next year, but not to this level, and apparently they are non-negotiable,” said one UK-based NVOCC.

“This has cemented their $3,000 January GRIs, and more,” said a forwarder contact.

And a shipper contact, importing bulk commodities into the UK from China, told The Loadstar yesterday carriers were refusing to accept his heavy boxes, although he said one line had quoted him $3,000 for each 20ft.

“I was only paying $435 per 20ft a month ago,” he said, “I have no hair left!”

The $3,000 per 40ft FAK rates proposed by Asia-North Europe carriers fore 1 January were already having a quantum of success prior to the Red Sea crisis, due to aggressive blanking programmes and, in some cases, the temporary suspension of services.

However, with a capacity crunch looming prior to Chinese New Year on 10 February – a consequence of loaders returning to Asia considerably off-schedule because of the longer sea route via the Cape of Good Hope – space will be at a premium.

And carriers have sent out numerous advisories in the past few days announcing a raft of new peak season surcharges (PSSs) effective 1 January, which they will add to the new FAK or contract rates.

However, The Loadstar understands that, in some instances, carriers are refusing to honour contracts that have only recently been agreed.

“I thought we’d got over that practice and we were building better relationships, but now the lines are just price gouging again,” said another NVOCC contact.

The talk is of rates of $10,000 per 40ft being quoted for January shipment from China to the UK. Peter Sand, chief analyst at freight rate benchmarking firm Xeneta, said that although that was not the market average, it’s what some shippers may have to pay for very urgent shipments.

“The clash with the upcoming season’s demand upswing, ahead of the Chinese New Year, is making the events even more dramatic for all involved,” said Mr Sand. “The massive spike is here.”

And there is also bad news for European importers anxiously awaiting the arrival of cargo coming via the already re-routed voyages: they will be asked to pay significantly more to obtain release of their boxes, when they are eventually discharged.

Most carriers have invoked force majeure clauses in their bills of lading that effectively excuses them from the contract of carriage and gives them the right to abandon cargo, or, most likely, levy additional freight fees, such as for transit disruption and contingency charges, which must be paid before the release of containers.

This week’s container spot indices from Asia to Europe have been overtaken by events, but the Asia to US components are still valid, given that carriers must give substantially more notice to transpacific shippers regarding proposed increases.

Xeneta’s XSI Asia to US west coast component was up 9% this week, to $1,745 per 40ft, which compares with a spot reading of $1,500 per 40ft a year ago.

Elsewhere, the XSI transatlantic average rate stood at a lowly $1,320 per 40ft, inching up 2.5% on the week.

Nevertheless, the rates contagion is likely to spread to this underperforming route in the coming weeks, fuelled by vessels and equipment being redeployed to more lucrative tradelanes.