The power of pricing. MAXMODAL digest
A hot-red market is a profitable playground for some and a shaky ground for others. But the Regulator’s grip is tightening around even the biggest players.
Depending on the side of the word, the number of blank sailings has been significantly volatile. If in the Asia-North Europe part, they have been increasing, in the Asia-Mediterranean direction blank sailings have been bouncing back and forth.
As for Asia-North America West Coast and East Coast, the spike in blank sailings occurred almost at the same time, just with a difference of a couple of weeks. Experts fear that the number of voided voyages may be about to snowball. The risk might be mitigated with the re-opening of Shanghai.
Spot rates follow the unstable pattern and, although WCI has demonstrated a 0.5 percent to $7,727.84/40ft decline, it still remains elevated almost by 41% compared to last year.
● A 2% drop has been observed in freight rates on Shanghai–Rotterdam. The new rate is now at $9,987/FEU.
● On the other way round, Rotterdam–Shanghai, rates went up by 2% to $1,451/FEU.
● Shipments to the UK are still commanding a premium of about $1,000 per 40 ft.
● The biggest plunge of 19% occurred on the Asia-US West Coast direction where the freight rate dropped to $12,596/FEU. However, it is still sky-high, representing a 104% increase than it was at the same time last year.
● Asia-US East Coast freight rate has shown a less steep decline of 7 % to $15,973/FEU. In comparison to the same period last year, it is 144 % higher now.
● For several years, Europe to the US East Coast rates used to be the most convent - setting the bar at $1,900 per 40 ft, and then over a year, they climbed to $3,500 per 40 ft. The current situation has shown that the mentioned increase is not the limit. They have gone further up by 5% hitting $8,991.
However, even despite these increases and big discounts that shippers reportedly have been offering on spot rates from China recently, it is the long-term contracts that companies are favoring the most. As shippers scramble to secure their supply chains ahead of the peak season, carriers are collecting huge first-quarter profits with to intention to give up the influential position in the hot-red market. Everyone is anticipating the re-opening of Chinese ports. The sector learned it from past mistakes when after the ease of the first lockdown, players couldn’t buy a slot for their cargo at any price for weeks. Now they are trying to secure the spots no matter the price tags.
Since the situation remains in favor of the shipping lines facilitating the increase of their influence, federal regulators demand the submission of more transparent pricing policies and comprehensive capacity data. The regulation aims to protect companies from the anti-monopolistic reign and anti-competitive rates and service. The FMC seeks to establish a uniform way for the alliances to report their activities including the movement of cargo on the major trade lanes. Shppers want the FMC to go further and take control over skyrocketed demurrage fees charged by ports and railroads at ocean terminals. Otherwise, according to them, they are being penalized for congestions that they are not solely responsible for. The initiative has already seen the light: Wan Hai has already been fined $850,000 over unfair detention and demurrage charges levied on containers between May 2020 and April 2022.
The problem of the unreasonable fees is worldwide. In Australia, shippers report that they are paying more than one billion dollars a year in international shipping fees, in addition to record high freight rates and a spate of surcharges. They are applied in a difficult time when shippers have no other choice but to deal with vessel bunching, limited operating hours, delays in biosecurity releases and inspections, extreme supply chain labor shortages, and much more.
Without a doubt, it seems like navigating through the current frenzy is rocket science. However, MAXMODAL provides concrete, up-to-date overviews of the logistics and transportation market.
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