Aggressive capacity management has supported vessel load factors and freight rates during the pandemic, leaving unfortunate shippers to face lower service quality and cargo roll-overs as carriers favour higher-paying spot cargo.
Despite significantly reduced bunker costs in the second quarter of 2020 shippers saw little benefit from these reductions as many carriers used their market leverage to hold onto bunker surcharges with the threat of rolled cargo.
And now shipping lines are using rollovers to bump up freight rates, forcing many shippers to pay no-roll premiums.
Many feel they have to pay premiums on the Asia and Pacific trades because they lack guaranteed space and if they don’t pay a premium their cargo could be sitting at origin for four or five weeks, because if you get rolled one week, there’s no guarantee you make it onboard the following week.
Increased rates and rollovers have been made possible by carriers’ capacity discipline – in turn, a result of the widespread industry consolidation in recent years.
The Metro commercial team manage our global rate, space and service agreements, with daily carrier allocation planning, to secure capacity and ship our cargo on time from every origin.
The carriers tight grip on capacity has seen load factors reach as high as 95% on headhaul services, up from 80% in “normal” times.
With sky-high load factors, the carriers are in an enviable position to dictate the terms of carriage.
Shipping rates are way up, with prices on the transpacific eastbound routes expected to be double what they were a year ago, with Asia-Europe spot rates following a similar trajectory.
The shipping lines 3rd quarter blanking programme suggests that they have discounted any semblance of a peak season, yet our global partners are are seeing demand improving as major consumer countries start to open up.
Metro are firm believers in loyalty to our customers and partner carriers and we work with long term fixed validity contracts that deliver competitive costs and reliable consistent services achieved through commitment and strategic planning with our partners.
In fact in a time of distress and shipping volatility, in a rising spot market, many of our clients have seen reductions in overall costs due to our long term pricing mechanism and capacity management, delivered through reductions in bunker surcharges over recent months.