'Slow season' and ocean network stabilisation easing pressure on rates
While container spot rates on the Asia-Europe and Asia-North America trades continued to remain elevated, ...
By Mike Wackett
Short-term freight rates from China to North Europe have breached the $20,000 per 40ft mark, while transpacific carriers are quoting rates of up to $25,000 to the US west coast.
And there was one report of $32,000 from Shanghai to Los Angeles being quoted this week,
The Loadstar has seen several quotes from the top five carriers of $21,000 per 40ft for July shipments from Chinese ports to Felixstowe and Southampton, with the average at around $18,000.
Although these massively elevated rates include a premium fee, to guarantee equipment and space, some shippers complain that their cargo is still getting rolled.
“We paid their ridiculous charges and thought that was the end of it,” said one forwarder, “but then we found out from our local agent that the boxes were still on the quay and the line wanted more to ship the cargo.
“Apparently, there was another FAK hike from the next vessel which they insisted on charging, which means their so-called premium fees are worth nothing,” he added.
And as the peak season approaches, it appears the situation is about to get even worse for shippers to Europe and the US.
They will need to brace themselves for another round of FAK and GRI rate hikes on 1 July, with yet another hike likely from the middle of the month and a PSS [peak season surcharge] of several thousand dollars.
One UK-based NVOCC told The Loadstar this week that a “curt email” from his carrier advising of a new increase was “the final straw”.
He said: “We have supported them through thick and thin, even when their standing was pretty low in the industry, and this is how we get repaid.”
On the transpacific, shippers are suffering similar problems. Jon Monroe, of Jon Monroe Consulting, said carriers had the ability to “manage rates” by rolling cargo, suggesting that the US Shipping Act needed to be updated to include a cap on rate increases and a both-parties damages clause for non-fulfilment of contract.
Meanwhile, Craig Grossgart, SVP of global ocean at Seko Logistics, confirmed to The Loadstar that one shipper had been quoted $32,000 this week for the shipment of a 40ft container from Shanghai to Los Angeles.
“To be honest, I think it was a polite way of the carrier saying to the customer it doesn’t want to take its business,” said Mr Grossgart.
Nevertheless, he said a figure of $25,000 per 40ft had been quoted to a shipper that needed to move 300 containers from Shanghai and Yantian to Los Angeles next month – “and that is a serious offer”.
With the addition of premium fees, plus a raft of other charges, the gap between the spot market indices and the actual rate being paid is widening by the week.
For example, the North Europe component of today’s Freightos Baltic Index stood at $11,006 per 40ft, while the FBX reading for the US west coast was $6,588.
Comment on this article
Jose Guerrero
June 26, 2021 at 10:40 pmThere are so many factors that financially impact the cargo owners, and one of them, as pointed out by this article, is the ever-increasing freight rates and the delays on the front end.
Unfortunately, once their cargo is in transit aboard the carrying ships, the cargo owners are faced with a significant financial risk, and the cost is a hundred times the freight charges paid. It comes from when the ship declares general average. And the sad part is that the cargo owners, in most cases, are passive participants in the unfortunate loss occurrence. I have shared these thoughts with various organizations, and there is extraordinarily little reaction to what I see as an inequity that cargo faces during a ship’s voyage.
There are two recent examples.
The Ever Given, in which general average was declared after the ship got stuck in the Suez Canal, is the best example. A massive loss and claims arose from that incident, which could reach half a billion dollars. And with the declaration of general average, the cargo owners, based on what is being revealed at this time, may have to pay up to 50 percent of every dollar in their commercial invoice (subject to reduction for some losses sustained by cargo owners). So, for example, if the average adjuster values a particular shipment at USD100,000, the cargo owner will have to pay USD50,000. And cargo interest contribution increases as the general average claim increases. Of course, it will be a lot more on goods in which the value is greater than that amount. It would not be too much pain for cargo owners with insurance, but will their premium stay the same? It will be disastrous for cargo owners without insurance or when there is an issue regarding when insurance/transfer of risk occurs. And what about the expenses incurred both by the cargo owners and their insurers and ship owners and their insurers for the cost of processing the release as well as the cost of the general average adjustment? In this case, some cargo interests hired the law firm Clyde & Co to assist the cargo interest. It is a good move. In the past, I hired this firm to question the validity of general average, and that increased the loss adjustment expense on the loss
There is another case of general average in the pipeline. The owners of NYK Delphinus declared general average following an engine room fire on their voyage to San Francisco. Again, the cargo interests did not contribute to the cause of this incident, the engine room fire. And yet, the cargo interest will have to pay for a significant proportion of the cost, e.g., towage to San Francisco, etc.
Because of the advent of mega-ships, there is now the disproportionate sharing of this general average claim. But what if one looks at this cost of continuing the voyage by the shipowner as one of their responsibilities as a “carrier” then the shipowner should take responsibility for all expenses incurred to continue the voyage to deliver the cargo in their custody to the consignee. Just imagine a trucker, a common carrier, demanding from the cargo owners to share the trucker’s expenses they incurred for towage of the truck, etc., to continue the transit to its final destination based on the principle of general average.
I advocate that the best solution is to eliminate general average. This view has been pushed by United Nations and other marine claims professionals. Instead, the one that sustains the loss (including sue & labour clause expense) should pick up their own cost, or by their insurers and stop this ancient sharing of cost concept.