With the container shipping lines imposing yet another round of general rate increases (GRI), FAK (freight all kind) rates from China are looking at passing $20,000 per 40’ container, while calls are rising for the industry to be regulated as a utility to prevent it restricting capacity and making global trade unsustainable.
The FBX Baltic index reading this week for Asia to North Europe climbed a further 5%, to $11,006 per 40’, representing an astonishing 1,000% increase on the spot rate of a year ago, which is resulting in many traders cancelling orders from China, because their margins are being swallowed up by the cost of importing.
Traders that have contracted sales at fixed prices face significant trouble, with such highly elevated freight rates and there are real fears that many smaller importers may go out of business.
Exports from the UK are also facing challenges, with vessel space issues, due to blanked sailings and rate increases on all export trades from the UK, although our primary carrier partner have been very supportive.
The main driver for the latest round of rate increases across is the Covid crisis at the southern China ports, particularly Yantian, which will have a much larger impact on the flow of goods to the US and Europe than the Suez Canal blockage and importers will be severely impacted as their containers sit in South China for weeks on end with little or no access to vessels.
Expectations are that when the backlog finally in China eases, pressure will rise on North European and US west coast ports, with congestion at southern Californian ports shifting from shipside to landside, due to rail carriers being unable to clear the terminals of containers.
Transatlantic shippers are also feeling the pain of rate hike contagion with week-on-week increases and this week’s FNI index for North Europe to US jumping 17%.
Meanwhile the Global Shippers’ Forum (GSF) has renewed its call for the removal of the shipping industry’s consortia block exemption regulation.
The GSF believe that (market) supply has matched demand a bit too closely and the co-ordination that is permitted by the block exemption has allowed the lines to manage capacity such that pre-pandemic capacity was running slightly ahead of demand and has now dropped behind.
GSF is calling for a system closer to that which manages airline code-sharing agreements, which are regulated, reviewed and transparent, so that it is understood what information is exchanged.
The current exemptions were provided by the European Union and jurisdictions all around the world and with a number starting to look hard at exactly why the shipping industry has behaved in the way it has, the shipping lines and their alliances may have some explaining to do.
Metro negotiate rate and volume agreements with a wide range of carriers across all three alliances, which means we can access the widest pool of equipment and offer shippers the biggest range of service offerings, port-pairings and rates.
Our fixed validity contracts provide supply chain security and peace of mind, but with space and equipment in such short supply, we recommend a minimum of four weeks visibility and booking window, to secure space on the vessel and get the right equipment positioned.
Please contact Elliot Carlile or Grant Liddell to learn how we can support your supply chains, even in the most challenging market conditions.