Ocean shipping lines implemented their peak season surcharges at the beginning of this year. Spot rates on eastbound voyages jumped ten percent and are expected to stay in effect until the Chinese New Year, according to Drewry Supply Chain Advisors.
According to The Journal of Commerce, “The Drewry container rate benchmark for shipping a 40-foot equivalent container unit from Hong Kong to Los Angeles rose 10.1 percent to $2,119 in the week ended Jan. 3, compared to $1,925 per FEU the week before.”
Philip Damas, Division Director of Drewry said, “Nearly all the carriers have implemented peak season surcharges of about $200 per 40-foot container. Their aim is to set the climate to stop the erosion of rates before they start their annual contract negotiations.”
“The rate increases are likely to hold at least until the Chinese New Year, but after that it’s difficult to say,” he said. “I’m skeptical whether the market can sustain significant rate increases this year.” It’s questionable whether or not the transpacific market can maintain such price increases, even with fuel costs on the rise.
Ocean freight lines in Asia are looking into the increasing surcharges and asking regulators in Beijing to make an assessment. In an effort to keep Asian ports competitive and efficient, the Hong Kong Shippers Council regularly reviews levels of maritime related fees and charges and checks for the possibility of rate reductions. Right now they are thinking that the increases in the region do not reflect the true business costs of the ocean shipping companies.
Meanwhile, ocean freight carriers are concerned about new vessels set to be delivered this year could upset the delicate balance of supply and demand. Tight capacities last year helped the ocean shipping industry rebound and turn a profit. However, NYK Logistics’ research group does not forecast that we will see the same type of situation for some time.
They say that new container ships currently on order are expected to increase capacity by ten percent annually, while cargo increases will only increase by seven or eight percent.
“This leaves a widening gap between demand and supply, for which we have to be prepared for some years to come,” said Yasumi Kudo, President of NYK Logistics in Japan. He expects NYK’s profit to decline in the second half of fiscal 2010 as a result of this “loosening gap between supply and demand”.
Philip Damas also reports that the new ocean shipping vessels increasing capacity are expected to affect rates. However, he doesn’t think that eastbound spot rates will be significantly different than they were in 2010, if you exclude the first few low-rate weeks of the year that caused ocean freight rate averages to fall.
About the Author: Nelson Cabrera is the Business Development Manager of Lilly & Associates International, a transportaion and logistics company specializing in ocean freight and ocean shipping services. For more information, please visit http://www.shiplilly.com/.