Carriers Pushing Rate Hikes Ahead of Likely Service Suspensions

By Mike Wackett (The Loadstar) –

Asia-Europe ocean carriers are making one final attempt to hike rates on the troubled tradelane next year.

Hapag-Lloyd yesterday joined CMA CGM in raising its FAK (freight all kinds) Asia-North Europe 40ft rate to $3,000 from 1 January.

However, the shipping lines have a long way to go to meet their aspirations; for example, Drewry’s WCI Asia-North Europe component is still at a lowly $1,343 per 40ft this week, albeit that the reading has shown a 15% uplift over the past seven days..

Meanwhile, for West Mediterranean ports, Hapag-Lloyd’s new FAK rate from the new year will be $3,200 per 40ft – $200 higher than that proposed by CMA CGM.

This week the WCI Asia-Med spot also saw an increase, of 15%, to $1,608 per 40ft, but Vespucci Maritime’s Lars Jensen argued that the impressive jump this week in the WCI’s North Europe and Mediterranean spots needed to be put into perspective, as it just brings the rates back to the levels seen in mid-September.

“The GRI implemented a month ago was severely undermined in the second half of November, and the new increase brings the Asia-North Europe spot level to a point only 6% above the previous GRI, and for Asia-Med it is 9% above the previous GRI,” said Mr Jensen.

The Loadstar understands other carriers will follow suit in the coming days, hiking their FAK rates by a similar amount as they attempt to start 2024 on a firm financial footing.

In the interim, more shippers have reported that they have been unable to book on carrier online spot platforms for December shipment, as carriers attempt to squeeze the market by blanking around 40% of their advertised sailings from China.

On 1 January, it will be just a few weeks until the start of the Chinese New Year holiday, starting on 10 February, so carriers will be looking to achieve a maximum percentage of their GRIs (general rate increases) in the build-up to the factory shutdowns.

Thereafter, Mr Jensen believes, carriers will be forced to take more drastic action, to address the worsening supply/demand imbalance.

“Given the widening gap between global supply and demand, owing to the delivery of a large orderbook, it is expected that carriers at some point will begin to idle vessels by closing-down entire loops,” said Mr Jensen in his container industry column for the Baltic Exchange.

“The most likely timeframe for this would be late in the first quarter, following the Chinese New Year,” said the analyst.

Elsewhere, the transpacific tradelane is in a healthier condition, with the Asia-US west coast spot nudging down by just 2% on the week, to $1,939 per 40ft, which means it is only 3% lower than for the same week of last year. US east coast rates increased by 7%, the WCI reading up, at $2,747 per 40ft, but down 31% on 12 months ago.

Away from the two major tradelanes, carriers servicing the transatlantic continue to rack up huge losses, due to sub-economic rate levels.

For instance, Xeneta’s XSI North Europe to US east coast spot stands at an average of $1,305 per 40ft, an estimated $700 below break-even and massively below the circa-$7,000 carriers enjoyed just a year ago.

The Loadstar is known at the highest levels of logistics and supply chain management as one of the best sources of influential analysis and commentary.