News / Hapag-Lloyd leads a rates fightback with FAK hike on Asia-N Europe

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Hapag-Lloyd is taking the lead in a rate restoration fightback for Asia-Europe services with a huge FAK tariff hike on cargo transported on or after 1 November.

The German carrier advised shippers today it would raise its 40ft FAK rate to North Europe to $1,750 and to the West Mediterranean to $1,950.

It is probably no coincidence that Hapag-Lloyd has decided to significantly raise its rates during the quiet Golden Week holiday, when spot indices would be expected to be flat.

Both its FAK rates are inclusive of the carrier’s MFR (marine fuel recovery) surcharge, but are not other tariff conditions and surcharges.

The new rates from Hapag-Lloyd compare with Friday’s assessment by a Singapore-based forwarder and importer collaboration platform of predominately sub-$1,000 rates for 40ft shipments to North Europe, drawn from its extensive data points.

The source told The Loadstar quarterly deals were attainable from carriers, to a range of ports in North Europe, of between $800 and $1,000 per 40ft, with monthly deals being touted at $750–$1,000 per 40ft.

And it added that origin spots were even lower, on offer from $700 to $900.

It said that, although many bookings were still being placed via annual contracts, renegotiations were “in progress”, with contracts signed for Asia-North Europe at $1,300 per 40ft “now considered way too high”.

However, with spot rates on the route losing 10% in value each week and taking rates well below 2019 levels, Hapag-Lloyd clearly felt it had to take urgent action to halt the erosion and push rates back to sustainable levels.

Moreover, a recent analysis by Sea-Intelligence, based on Hapag-Lloyd’s detailed data in its quarterly financial reports, found that the Hamburg-based carrier’s costs were some 29% higher than prior to the pandemic. Major components of Hapag-Lloyd’s cost inflation were vessel operating costs up 30% and a big leap in handling and haulage costs, running 37% higher than pre-pandemic.

In July, Maersk attempted to undo weeks of heavy discounting on the Asia-North Europe tradelane, including prices offered via its in-house digital platform, Twill, with a ‘shock and awe’ FAK hike of around $1,000 per 40ft. This was followed by similar FAK rate increases from peers, including CMA CGM.

Helped by a brief pick-up in demand in August, carriers were able to make at least 50% of the increases stick, although, subsequently, during September, the increases, and more, were given back in further rounds of discounting ahead of the Chinese Golden Week holiday.

A UK-based NVOCC contact told The Loadstar this morning he “doubted” whether Hapag-Lloyd would get even a third of its proposed FAK rise – unless carriers decided to temporarily suspend some loops.

“Hapag’s biggest threat might come from its own VSA group, THE Alliance, where the partners are all desperate for cargo to fill their empty slots,” he said.

Nevertheless, he agreed that current rate levels were “unsustainable”.

“It’s no good to anyone if the lines start losing money heavily again because of these crazy rates, as they will just be forced to anchor ships and we won’t have any sort of reliability in the supply chain,” he said.