Shipping companies raised their fees, and trans-Pacific freight rates jumped to a new high! The challenges facing the container shipping market continue into the next year
2021 is coming soon, but the high freight rates will follow into the next year, the challenges faced by the shipping market will continue into the next year, and the trans-Pacific freight rate will hit a new high.
Since the sharp increase in freight rates in late September, container freight rates from Asia to the United States have basically remained at a high level, and the US West has remained within the range of $3,800-$3,900/FEU.
The rise in freight rates seems to have slowed down last week. Due to the still high demand for shipping and the resulting shortage of global containers, freight rates on major Asian routes suddenly jumped this week.
According to the Freightos Baltic Daily Index (Freightos Baltic Daily Index), on Monday, the Asia-West Coast freight rate rose to a record high of US$4189/FEU, an increase of 8% from last Friday. The current freight rate of this route is almost three times that of the same period last year.
Freight rates from Asia to the East Coast of the United States are also rising. The spot freight rate on Monday was US$5397/FEU, a 9% increase from last Friday. Now, the freight rate on this route is twice what it was a year ago.
The freight rate at this stage seems to have laid the foundation for the sustained ultra-high freight rate in January.
It is reported that after increasing the surcharge in mid-December, many shipping companies plan to increase the general rate (GRI) starting this week.
On January 1, CMA CGM, COSCO (applicable to service contracts only), Evergreen, HMM, ONE, Yang Ming and ZIM announced an Asian-American GRI of USD 1,000/FEU. In addition, Hapag-Lloyd listed the GRI price on January 1 at $1,500/FEU, which includes the previously postponed GRI.
The ports of Southern California in the United States are as busy as always, and the weekly freight volume has increased greatly. According to a report from the Southern California Maritime Exchange on Monday, there are 24 container ships anchored in San Pedro Bay and another five ships will arrive, four of which will anchor in the ports of Los Angeles or Long Beach. The maritime exchange reported that conventional anchorages were full and some emergency anchorages were also occupied.
The good news is that Asian ports have eased. ONE has suspended the collection of the reefer congestion surcharge (CGS) for Tianjin/Xingang Terminals from December 28. MSC also cancelled Xingang CGS on December 24.
Worldwide Logistics consultant Jon Monroe believes that unless freight volumes drop, it will be difficult to relocate enough containers to restore the industry to its previous model.
Essentially, congestion and container imbalance have been somewhat eased, but the container shipping industry has not yet out of the predicament, which makes the plans for the next year difficult for importers and exporters.
Monroe believes that the owner of goods (BCO) needs to meet two points, one is a reliable supply chain and an accurate timetable; the other is a reliable budget to cover the cost of the commodity market. In 2020, these two requirements have not been met, and one of them is related to freight, so it is too early to judge the level of freight in 2021.
However, many of these issues will depend on the level of demand. Although demand is still strong and online sales are active, in the near future, the most accurate measure of demand will be factory orders.
Monroe explained: "In December, we found that many factories were unable to ship products due to lack of containers. Some factories asked BCO to slow down orders or stop orders until their products left the factory. If this situation continues (orders Surge and container shortage), we can expect the bottleneck to continue until the middle of the year, but most certainly it will continue until the end of the first quarter."
It is expected that some factories will work until the Spring Festival. Monroe pointed out that “workers are unlikely to give up their long vacations” and demand will still exist in the short term.
In addition, traffic congestion and transportation interruptions have caused shippers' freight costs to hit unprecedented highs, and serious delays have occurred. The freight is so high that the cost of transportation is higher than the value of the goods in the box. This fact requires a readjustment of the 2021 transportation budget.
The cost of non-vessel carrier (NVOCC) has spiraled upwards throughout the year, including the issue of prepayment of funds to the carrier. Monroe explained: “Earlier this year, each container was prepaid 1,500 to 1,600 US dollars, and now it needs 5,000 to 6,500 US dollars per container.”
A 400% increase means that many NVOCCs are financially beyond their capabilities. Since all orders for January have been booked and many factories have booked three to four weeks in advance, "the premium for January is likely to increase."
The chaos in the market makes it hard to imagine that it will return to normal soon, Monroe said: "We have both the Covid-19 pandemic and the container pandemic."