By Mike Wackett
Ocean carriers were in confident mood, with most container lines announcing increased FAK (freight all kinds) rates from 1 February.
The dilemma for those Asia Europe shippers out of contract – in a tradelane where contract rates generally run from 1 January to 31 December – is whether to hold off signing new higher rate deals until after the Chinese New Year. In recent years it has been a smart tactic for shippers to hang on until the holiday, which this year starts on 28 January, when demand traditionally weakens. But, analysts have warned that this year postponing rate negotiations with carriers comes with a health warning. And in a chilling message for shippers, Drewry said that in “worst case scenarios” contract rates could leap by as much as 40 per cent this year. It added that it expected average contract rates to rise by 12 per cent and by 14 per cent on the main east-west routes.
Patrik Berglund, CEO of container freight pricing platform Xeneta, said: “I think it is a big risk that shippers / BCOs have postponed their contract negotiations.” He believes it might now be better for them to wait until the end of the first quarter to resume rate negotiations, to see what happens post-CNY. However, he added: “I’ve got to stress that this is a risk, because, if the rate increase related to the CNY stays, then shippers will be worse off.”
Meanwhile, there was no significant movement in container spot rates ahead of the Chinese new year holiday. The Shanghai Containerized Freight Index (SCFI) recorded spot rates for Asia-North European and Mediterranean ports at $1,052 and $1,004 per teu respectively, both ticking down marginally on the week. And for the transpacific, SCFI spot rates were off just 2.3 per cent on the week for the US west coast, at $2,167 per 40ft, while for east coast ports, rates were up 1.5 per cent to $3,647 per 40ft.
Traditionally spot rates fall during the lunar holiday and the immediate period following, due to soft demand, but this year could buck that trend due to high load factors on export vessels ex Asia, resulting in a significant rollover of cargo.
Anecdotal reports coming into The Loadstar indicate that most voyages bound for Northern Europe are overbooked, and that carriers are being “selective” over the containers they load, leaving low-rated contract cargo on the quayside. As a consequence, one senior manager of an Asia-UK NVOCC told The Loadstar he had been obliged to pay higher spot rates to secure space, despite having a rolling contract in place with a number of carriers.
Meanwhile, Westbound Shipping Services, an NVOCC based at DP World London Gateway, said this week it had been approached by many companies who had hitherto enjoyed sub-economic freight rates, but were now experiencing major service issues.
Commenting further on the low rates still being touted in the market, Westbound warned: “The catch simply is: the vessels are full so low rates are not worth the digital screen they are typed on!”
Reprinted courtesy of The Loadstar (www.theloadstar.co.uk)