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Shipping Update and Outlook: Further Rate Increases Announced and Capacity Drying
With the start of a new decade, we are facing the recurrence of the problems from the closing of the last. During the summer of 2008, we were faced with an extreme space shortage on vessels as well as aircraft lifting cargo to the U.S. and worldwide. During 2009, rates fell to historic lows and surcharges fluctuated wildly. We are now again facing the problem of capacity shortages in the Transpacific lanes and Transatlantic lanes, along with carrier attempts to recover revenues through new “emergency” surcharges and hikes in bunker fuel.
The problems we are facing this decade, however, seem to be by design. Earlier this year carriers started pulling vessels out of service in all trades creating a supply shortage that would sustain increases in rates. Singapore harbor has become a parking lot for the world’s fleet.
Transpacific services have been slashed or eliminated all together. UASC, for example, completely stopped servicing the east coast of the United Sates from China in the first quarter. The Chinese New Year holidays, starting February 15, 2010, will usher in a chaotic rush for already limited space. Numerous carriers have ceased service to the UK and Mediterranean destinations from the U.S.
The bright side is that the carriers seem to have found their recipe for financial recovery, bringing with it the promise for a more stable environment for 2010. Highlights include:
- The TSA has announced that on January 15, 2010 the aptly named Emergency Recovery Charge (ERC) will be implemented (details described above).
- Bunker and GRI announcements for the Transatlantic lanes are now coming in two weeks intervals with the first increase implemented January 1, 2010, the next increase on January 15, 2010, the next increase February 1, 2010 and so on, all with a 30 day notice.
- We have observed that the implemented GRIs and bunker amounts are generally not as high as first announced. We expect mitigation to continue.
The common consensus from the carriers is that losses cannot be sustained. The container shipping business has turned from a long term planning model to a short term quarterly business model. This fact has and will continue to create severe problems for customers who have planned their costs and sales based upon promises the carriers are apparently no longer able to keep.
CVI is working with our carriers, directly with their foreign head offices and their regional pricing departments, to ensure that the rates we receive remain as fair and balanced as possible. For more information or rates, contact your CVI customer service representative or Josef Fellhofer at jfellhofer@cvinternational.com.
CV International customers receive regular e-mail updates on industry news and events from CVI managers. For more information, please contact us.