Cheap Spot Rates Now Could Cost Shippers at Peak Season

By Alexander Whiteman (The Loadstar) – Despite the continuing deterioration in rates, ocean shippers are being advised to avoid the spot market and stick to their allocation with carriers.

Abandoning their contracted space could come back to bite them when peak season rears its head, they were warned this week.

Transpacific sailings to North America aside, east west sailings experienced a third successive week of declining spot rates, seemingly leaving no one able to predict which way the wind will blow.

One punter taking a shot, Flexport’s head of ocean for Europe, the Middle East, and Africa, Guillaume Caill, told those listening to the company’s European Freight Market Update, he thought the decline may be easing.

“The market has stabilised from April going into May, and I think the decrease in the spot market may have hit its bottom,” he said, before warning shippers: “Do not try and overbook on the spot market; stick to your allocation, because if you do not, the carriers may see you not performing in slack season and try and use this to right-size your allocation in the peak season.”

Part of the problem for all involved is that the market has become chaotic as a result of the situation in the Strait of Hormuz, which has led to uncertainty not only in supply chains, but spending patterns.

Vespucci Maritime CEO Lars Jensen said forwarders had noted that the chaos had prompted a slew of carriers to schedule “a lot” of blanked sailings over the first half of May, “making the current space situation very tight”.

One forwarder based in China told The Loadstar: “Many shipments have been rolled-over to later sailings departing after the holiday, which has further tightened space in late May, as these shipments have consumed a large portion of available allocations.

“As a result, securing space for new bookings has become increasingly difficult. Based on current trends, the main challenge for May will be space availability. This is why carriers are so confident in raising rates in the coming weeks.”

Mr Jensen said that, should service cancellations perpetuate, shippers needed to show flexibility, adding that “lost sales in the other end is always going to be more expensive, vastly more expensive than being fair with your shipping line”.

And the forwarder noted that while “it is true that there are still opportunities in the market to obtain relatively lower rates for certain special shipments”, there appeared to be a trend of ocean freight rates continuing to rise.

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