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TPM24: Spot Rate Spike Hits Transpacific Contract Negotiations

The Loadstar
Total Views: 1124
March 11, 2024

By Mike Wackett (The Loadstar) –

Based upon initial feedback to The Loadstar, there appears to have been only a handful of shippers, forwarders and NVOCCs that came away from the S&P Global TPM24 conference in Long Beach, California, last week with new transpacific contracts.

Some had decided to wait for the Red Sea crisis to abate and spot rates to fall, while others simply received what one forwarder told The Loadstarwas a “ridiculous response from a carrier to his company’s RfQ” (quotation request).

“We came here with the objective of trying to get the basis for a new annual contract, but it seems that the spike in spot rates connected to the Red Sea disruption has given the lines a new baseline for tenders,” one California-based customs broker told The Loadstar on the sidelines of TPM24.

Another contact e-mailed The Loadstar after the event to report that, “despite our best efforts we were unable to come to terms at TPM”.

The spot indices had remained elevated going into TPM with, for instance, the Freightos Baltic Global index in February 2.5 times higher than at the end of December, when carriers began diverting ships around the southern tip of Africa.

More specifically, the FBX Asia-to-US west coast component recorded an average of $4,754 per 40ft last week, which is some 120% higher than the ‘market’ at the time of last year’s TPM conference.

And, according to Kieran Walsh, commodity broker at Freight Investor Services, the transpacific tradelane “will likely see a continued firmness” as a result of the Red Sea instability and resilient US consumer demand.

“An improved macroeconomic outlook globally, with good levels of consumer resilience, continues to make the case for elevated rates in the medium term, even without the Red Sea instability and Panama Canal restrictions,” he said.

Moreover, during TPM shippers were warned that, although carriers had managed to plug the gaps in liner services as a consequence of longer voyage times around the Cape by deploying extra capacity from the charter market, there was now no open tonnage available, with all sectors effectively ‘sold out’, at least for the next few quarters.

“From a risk management perspective, shippers should be aware that even though we have sufficient capacity to go around Africa at the present time, there is no additional redundancy if yet another crisis emerges to soak up more capacity,” said Vespucci Maritime CEO Lars Jensen.

Unlike in 2023, transpacific carrier account managers did not appear to be going all-out to sign new contracts at TPM – rather, they were content to lay the foundations for future negotiations as, and when, the market normalised.

Until then they are “comfortable” shipping a higher percentage of spot cargo on the route, according to a carrier sales executive at a forwarder after-conference networking event.

“We have been given guidelines and absolute limits on how far we can go down below spot, and that has been a sticking point here. But we will give feedback and, hopefully, we can get some deals under our belts in the coming weeks,” said the executive.

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.

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