News / Demand for Chinese exports 'a catalyst' for rate increases and port congestion

ID 224844235 © Andrii Yalanskyi

A notable surge in bookings from China to one region is “a catalyst for GRIs” and subsequent port congestion.  

Hans-Henrik Nielsen, global development director at NVOCC CargoGulf, told The Loadstar that he had noticed a “strong pick up in cargo bookings westbound to Sri Lanka, the Maldives, Arabian Gulf, Pakistan, India, and the Red Sea”. 

This, he warned, would inevitably lead to a spike in ocean rates.  

“At the point of writing, we are fully booked three vessels forward on our westbound legs, which naturally means that rates are going up for some markets with weekly GRIs, and for others twice a month,” he said.  

Mr Nielsen explained that strong surges in demand “immediately kick in yield calculations for various port pairs… an almost automatic in-house price catalyst that sets GRIs”. 

“This most definitely has a boomerang impact when vessels are full and overbooked. Each port pair is competing with another for space. The highest yield gets the space allocation.” 

In particular, Mr Nielsen highlighted the India and Pakistan markets as seeing very strong traffic from Asia.

“The recent unfortunate vessel incidents in the Indian Ocean have only added to the pressure on space,” he added. 

Indeed, Ligi Logistics also reported “a notable surge” in Indian imports from China, warning: “This has the potential to cause rate increases by carriers across all Asia Pacific and ISC regions in the coming weeks.”

And Ligi reported congestion at Nhava Sheva Port, with extended waiting periods for container entry, and predicted congestion would emerge at ports in Sri Lanka and Singapore. 

“Consequently, some carriers have revised their cut-off times and are now departing early,” said Ligi. “This may result in berthing delays and a higher possibility of missed connections, in addition to the challenges related to the situation between India and Pakistan.” 

Mr Nielsen suggested that while “it’s too early to talk about a clear shift in sourcing patterns”, this signalled a trend of reduced purchasing from Europe, and more in Asia. 

“Time will tell whether this is a blip, or a longer-term practice,” he said.

“The reason I say that is, conversely, we have seen a significant drop in volumes from Europe, and the rates ex-Europe to the Arabian Gulf and Indian Subcontinent have, subsequently, suffered.”