OceanX: Calculating capacity; carriers in the dock; Covid concerns climb
Big is still beautiful
Shippers using the North Atlantic tradelanes are getting a taste of what their counterparts on the transpacific have been dealing with for some time.
Westbound pricing is rising sharply in response to a combination of robust demand and equipment shortages.
According to rate benchmarking platform Xeneta, spot rates for westbound containers last week were almost double that charged at the end of March. Meanwhile, container rates in Europe climbed 57% in the first four months of the year, largely helped by a 30% surge from March to April.
By contrast, pricing from Asia to US ports on the east as well as the west coast rose by a relatively modest 2% last week, reported pricing and booking platform Freightos in its weekly market update.
Faced with limited capacity well below demand levels, European shippers now have to pay premiums to make sure their cargo moves across the Atlantic, noted Freightos research lead Judah Levine.
“Demand and capacity constraints have added transatlantic shippers to the list of those adding hefty premiums on top of elevated rates to secure space,” he noted.
Most observers regard this as the opening salvo of a series of rate and surcharge hikes as the peak season kicks in, bringing elevated premium charges to secure space. Some lines have already announced peak surcharges from Europe to North America coming into effect on 1 June. These range from $500 to $2,000 per teu from Northern Europe.
This situation is not expected to reverse itself any time soon. Citing robust demand in the US amid a rising vaccination rate in the population, Freightos expects US appetite for imports to remain strong. Retailers have kept bolstering inventory levels to avoid stock-outs, and the resurgent B2B sector is adding to the strong demand for inbound capacity.
East coast ports have reported strong gains in traffic. Container throughput at the port of Savannah was up 38% year on year in April, and rail lifts were 39% higher.
“Demand for products and services both domestically and abroad is driving significant gains in Georgia’s cargo volumes. The supply chain continues to experience unprecedented increases due to the reopening of the local, regional and national economies,” commented Griff Lynch, executive director of Georgia Port Authority.
Savannah is boosting rail capacity through the construction of its Mason Mega Rail Terminal that is due for completion later this year. Up the coast South Carolina Ports Authority is boosting capacity at its Inland Port Greer Terminal after record volumes in March.
On top of elevated ocean freight rates to North America, European shippers are facing higher costs getting hold of containers. Online container leasing platform ContainerXChange noted that average pricing for 20ft containers in Europe rose 57% between January and April.
CEO Johannes Schlingmeier sees strong evidence that the surge in container prices is at least in part due to carriers’ preference to move empties to Asia rather than wait to get them filled with export cargo out of Europe. He added that the Suez Canal closure appeared to have aggravated the situation.
“These are good times for equipment owners across Europe as indications are that even if container prices dip slightly, scarcity will remain until carriers change tack and start looking for more backloads. As a result, container prices are likely to remain at elevated levels for some time, although we do think availability for exporters will improve in the coming months,” he concluded.
For many shippers, the elevated shipping and container pricing adds insult to injury. They have to pay a premium to secure capacity on services that have deteriorated markedly. According to research firm Sea-Intelligence, schedule integrity in the transatlantic arena sank to 33% in April, down from 61% a year earlier.