Container freight rates are at their highest levels in five years, Westbound Asia to Europe, driven by rocketing demand and the carriers manipulating capacity to create under or balanced supply, which allows the shipping lines to cherry-pick the best paying cargo and maintain rates at the strongest levels.
With demand comfortably out-stripping supply, manufacturers, tech brands, retailers and the largest importers are using every option to secure space on vessels leaving Asia, including signing short-term contracts that are significantly more expensive than what they agreed in their annual contracts at the beginning of the year.
There has been a marked increase in demand for short-term contracts, which run from one to several months, pushing these short-term contract rates up by over 40% since early September.
The increase in short-term contract freight rates is influenced by spot rates which have risen to $4,000 or higher to ship a container from Hong Kong and Shanghai to the ports of Los Angeles and Long Beach.
Short-term contract rates are likely to move even higher in the final Quarter of 2021 we are already seeing in the market.
If spot rates remain near these record highs in the coming weeks, after the China Golden Week holidays, it is likely that importers who are desperate for more capacity from Asia load ports will continue to bid contract rates even higher.
Importers, including some of biggest names in business, are also turning to non-vessel-operating common carriers (NVOCCs) and forwarders, like Metro, for additional capacity because they are exceeding the volume commitments they made, or the carriers are rolling their cargo for higher yield container movements.
We do not anticipate any let-up in the short-term, with imports from Asia remaining buoyant through October, as shipments of PPE, e-commerce, home office furnishings, retail products and traditional merchandise show no sign of letting up.
Short-term contract rates this month are higher than the rates that importers signed for in their annual service contracts, but they are much lower than spot rates and savings can be considerable, if importers can get the space. But to guarantee any space it is likely that they will have to pay a premium and with only so much available the carriers will be parsimonious with allocated capacity.
Metro will be negotiating our 2021/22 contracts starting in October with partner shipping lines. We recommend and encourage this model against short term or spot pricing to provide stability and additional reliability with capacity through commitment. If you would like further details of our collaborative approach please contact Ian Barnes (firstname.lastname@example.org) for a discussion into our strategic negotiations with partner carriers.
If you have any questions regarding general market intel and industry developments or would like further information, updates, or the latest market pricing please contact Chris Carlile or Grant Liddell.