Asia | US news digest. 5 Aug
Although it is a universal truth that patience is a virtue, shipping companies would gladly disagree. The lead time is increasing and so does the pressure.
More complaints fire up against carriers as well as overall anger at the failure of shipping lines to meet their contractual obligations spikes up in the industry. Following its formal call for FMC to take matters in their hands, MCS Industries has stated that the problem is that when negotiating the prices, the company accepted that prices would be 70-80% higher than last year, but they didn’t get the containers agreed to them. As a result, the prices surged and now there’s barely any room for negotiations. This is a low blow especially since the market situation continues to remain challenging.
Due to the disruptions, the dwell times for many companies have increased and with the soaring demand they have to add more containers. Although they are being built at a relatively fast rate, it is difficult to get them delivered because of congestion and numerous blockages. This tendency is spreading from intermodal to rail resulting in volume-limiting rail allocations. Moreover, some companies are even planning for up to four weeks of additional lead time to ship their manufacturing supplies from Asia or Europe.
The obstacles are pressuring the manufacturing sector into slow supply deliveries. With high demand, factories are sucking inventory; the shortage of raw materials leads to long lead time for purchases; the lead time for raw materials themselves is also record high. However, the positive news about employment levels going up gives hope that it will also improve deliveries and inventories.
It seems like the alternative routes for shipping are not always a good idea. As more ocean carriers continue to shift tonnage from intra-Asia and north-south trades to east-west routes, it drives the freight rates up in these directions too. In addition, companies have been rigorously expanding their capacities, so now they have the opportunity to demand premium fees from shippers to guarantee equipment and shipment. However, no other routes will be able to fully substitute Asia, so as long as lockdowns remain confined in China, the impact on freight markets is likely to be muted. The recent data has shown that current queues are 76% above the five-year average.
Meanwhile, the anti-monopoly battle in South Korea takes a new span. Regarding the ongoing action to rescind the massive fines imposed by the Korea Fair Trade Commission on several major liner operators, lawmakers are now planning to amend the country’s Monopoly Regulation and Fair Trade Act to exempt the shipping industry from its jurisdiction to prevent a recurrence. They claim that the recently achieved improvements in the industry revitalisation simply cannot be destroyed with larger fines.
Meanwhile, the new surcharges from European ports to several American destinations have been announced. There will be Peak Season Surcharge of US$592 per TEU and US$1,185 per FEU for all cargo types, from Italy to West Coast South America, East Coast Central America and the Caribbean, West Coast Central America. In addition, FAK rates have also been increased from the Mediterranean direction. The forecast still predicts that the current situation will remain the same. More bottlenecks at ports and shortages of equipment in supply chains will be caused. The recent data has reported the increased Ocean volumes of 15%.
The new COVID restrictions in China have caused the rise of the airfreight rates. The latest update has shown that they reached $9.60, $11 and $12 per kg.
As a means of addressing the capacity crisis, Yang Ming has launched extra loader services on the transpacific and Asia-Europe tradelanes. The company is partly owned by the government and its new initiative is the result of cooperation of the officials with the Maritime Port Bureau.
