It is being reported in some of the industry press that carriers, in the face of diminished container rates and rising oil prices, are looking to recoup revenue. This is a result of not only indicated Rate Restoration Programmes but also additional and potentially significant BAF increases. It is their intent to implement these over the coming weeks.
The ocean carriers are preparing to release a number of GRIs this spring in an attempt to stabilise freight rates ahead of the peak season. Hapag-Lloyd is the first to release a $1,000 per 40ft increase on shipment from Asia to the US from 1st May.
Published on the 31st March, to avoid any association with an April Fool’s joke, the German carrier’s custom advisory has taken the industry by surprise, given the uncertain state of a trade lane still suffering from chronically inflated retail inventories.
As a result, to mitigate the weak demand, carriers are planning to blank up to 50 head haul sailing from Asia to the US east and west coast this month.
Container spot rates between Asia and the US west coast have dropped from over $20,000 per 40ft in mid-2021 to only $1,000. Therefore, carriers desperately need to raise short-term rates in an effort to boost stalled annual contract negotiations.
One carrier told The Loadstar:
“They won’t get anywhere near a $1,000 a box, but it is more about setting the tone for the outstanding contract discussions.
Hapag has used these ‘shock and awe’ tactics before and the important thing is that, despite the weak market fundamentals, they can get BCOs thinking again about sustainable pricing,”
He added.
It remains to be seen, however, whether Hapag-Lloyd or its peers will look to announce similar GRIs on other routes, including the key Asia-North Europe trade lane.
Recent reports suggest that in the past few weeks, carriers have succeeded in matching supply with demand on the transpacific and Asia-Europe for the most part, while export sailing last week was close to capacity.
Thanks to this, spot rates are seeing a slight uptick as a consequence.
A logistic source told Platts Container Freight Weekly Commentary:
“Vessel space is lacking at the moment; we are seeing vessels full until the third week of April, so there are chances that carriers will try to push for further rate increases for April voyages.”
Meanwhile, a big spike in oil prices, following the OPEC + coalition of oil-producing countries’ surprise decision on Sunday to cut output, could result in a fresh raft of bunker surcharges for shippers.
The price of Brent Crude jumped by around $10 to $82 per barrel yesterday, adding even more pressure on the bunker supply market, resulting in the cost of Rotterdam-sourced compliant low-sulphur fuel increase $25 today to $595 per tonne.
As a result, it is likely to remain higher in the coming weeks, which will trigger carrier BAF increases.
The carriers have a real want to increase rates before the current “stalled” negotiations with the BCO (Beneficial Cargo Owners) resume, where their contract rates are fixed for 12 months. It remains to be seen how the markets will react, but it is inevitable we can expect some price increases in the very near future.
For any further details or information, please contact your local CCI account manager at +44 0113 271 1555 or info@carrycargo.com.
