'Tariff today, gone tomorrow' taking transpac box trade to the brink
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Shipping line slow-steaming techniques are pushing increasing numbers of shippers to consider near-sourcing strategies, according to one major sea freight forwarder.
Cas Pouderoyen, senior vice-president of global ocean freight at Agility Logistics, told delegates at the TOC Container Supply Chain event in London yesterday that, with increased transit times from Asia, a number of his European clients had looked to source product nearer to their end markets.
“We have a customer in Sweden who was facing a 45-47-day transit out of the ...
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Comment on this article
Henrik Christensen
June 25, 2014 at 2:19 pmThere is now an alternative – the New Silk Way – with transit time from Western China to Germany in 16 days.
Jonathan Paul Roach
June 25, 2014 at 2:55 pmShippers shouldn’t be moaning about slow steaming, especially as shippers hold carriers to ransom squeezing lines for every last penny on freight rates. Carriers could contemplate a super-shuttle Asia-Europe service at a premium rate.
BA did it with Concorde a many years back.
David Thompson
June 25, 2014 at 4:10 pmThere is no question that the anecdotal evidence mentioned in the article is becoming more prevalent – we too have customers looking to move some of their sourcing from Asia to Eastern Europe or Turkey. With greater technological improvements, manufacturers are reducing lead times but shipping lines are ever-increasing transit times. Along with many others, I have been advocating a faster transit premium service to shipping line representatives for some time now, but there is no sign that shipping lines are listening to their clients. Even the ill-fated P3 network schedules missed the chance to implement a fast transit service, when they had a great opportunity. It might even have been a critical point that would have set the service apart, and improved it’s chances of approval.
Jonathan – you mention shippers squeezing lines for every last penny, but I’m not sure that’s generally true. The Lines themselves have lead the race for the bottom at times in the recent past, and when rates are going down, I frequently receive reduction notices from Lines, even though I’m not asking for them. In my experience, after the roller coaster of the past few years on Asia-Europe, shippers – particularly the importers are paying the freight – are striving for rate stability at a fair price.
Zant
June 26, 2014 at 12:38 amIssue most of deepsea trade (Asia – Europe) are controlled or flowing through freight forwarders. Even if shippers wanted rates stability, the freight forwarders who profit from gap in the rates might want more rates volatility (driving in)
Ricky Forman
June 25, 2014 at 4:13 pmI completely agree with Jonathan’s comments. I am sure if large BCO’s paid $1000 per teu, the service from carriers would be more efficient.
Richard Ward
June 26, 2014 at 8:28 amShould the container industry learn from other commoditised markets and move towards spot based pricing? The trend towards spot or index linked pricing has been seen across a wide range of markets where volatility in spot ensures that long term contracting becomes ineffective or “unfair”. Paying spot would ensure that participants pay a fair/market rate and allow both parties to benefit from the market when it moves in their favour.
Ricky Forman
June 26, 2014 at 2:14 pmDavid, how do you define “fair price” spot maybe?
David Thompson
June 27, 2014 at 8:28 amRicky – a ‘fair price’ is one which enables the shipping line to cover it’s costs and make a profit, whilst at the same time enabling the customer to buy and ship the goods and do business too. In 2013, we saw Asia-Europe as low as US$500/TEU and as high as US$1800/TEU. Neither are good, because the lower rate impacts heavily on the Line, whilst the higher rate forces the client to either drop the deal or look elsewhere, particularly on low value cargo. The knock-on effect for the Line is that their high rate reduces their available business. If Lines had the discipline to set a realistic floor for rates based upon their costs, the band of fluctuation would be much narrower, giving clients the confidence to plan ahead and purchase, thus increasing the volume of business available to ship. It’s a win-win. To put a figure on it, I reckon circa US$1100-US$1200/TEU would work for most.
Richard Ward
June 27, 2014 at 1:43 pmHi David, I agree the above situation would be ideal but unfortunately its pure game theory and as you know not how the market works in practice. If shipper 1 agrees a fair rate at say $1100 with the line but then spot falls to $750, competing shipper 2 moves to spot and therefore secures freight at a reduced rate, outperforming its competitor. Does anyone have any other examples of markets that are highly volatile but whereby fixed rate contracts are the norm?
David Thompson
June 27, 2014 at 1:49 pmHi Richard – I get that completely, but I’m talking about Lines having the discipline to maintain their spot rates at sensible levels, i.e. US$1100 – not agreeing a fixed rate. The race for the bottom does no one any good. I realise it might damage the FFA market, but the reality is it would be better for the vast majority of shippers if rates were stable enough to avoid the use/need for FFA’s. That’s how it always used to be.
Richard Ward
June 27, 2014 at 2:46 pmI couldn’t agree more. It does seem to be an endless cycle and will take a huge shift in mentality from the lines. Even this week we have heard of carriers postponing their GRI’s on Asia-NWE until the 15th of July to boost volumes. This has now put at risk those carriers who want the GRI to come into force now, due to their own utilisations being strong.
Ricky Forman
July 01, 2014 at 8:00 amHi David, i do agree with you but unfortunately the market won’t revert back to how things were due to the fundamentals and game theory tactics as described by Richard above. Rate volatility is the only certainty going forward and those that manage this risk will be better placed than those who leave it to the fate of the market. Proactive behaviour always trumps reactive behaviour. Failing to act is expensive.