BLOG. Greedy Ocean Carriers

September 16, 2020

Chinese authorities reportedly met with major container lines regarding record-high trans-Pacific spot freight rates, spurring reports that regulators instructed carriers to not push for any more general rate increases and to remove blank sailings after Golden Week.

 

This is the first time that Chinese authorities have interjected in both pricing and capacity management on the transpacific, as rates soared to record highs again this week. The meeting was summoned by the Chinese Ministry of Transport and the Shanghai Shipping Exchange.

 

China’s Ministry of Communications recently discussed refusing to allow carriers to increase the spot rate from China to the US, and that their suspended sailings must be reinstated from week 42.

 

The meeting request was triggered by soaring rates, as this week’s Shanghai Containerized Freight Index (SCFI) shows the market tightening again, impacting all trades. For the seventh consecutive week, transpacific trade to the US west coast rate increased to new heights.

 

In fact, freight rates in recent weeks on the Pacific routes, which service trade between China and the US, have soared to record highs - rates to the US West Coast and East Coast are currently standing at 163 percent and 80 percent higher than at the same time last year respectively, for a forty-foot container, feu.

 

As we reported previously, the Federal Maritime Commission (FMC) has been asked to take a look at current market conditions. So far their conclusion is that there has been no breach of existing Maritime Regulations, so at this time they will not aggressively pursue action against the carriers.

 

In addition to soaring rates, the market is expected to be strong and full throughout September and demand will probably remain high until end of October. Carriers have announced blank sailings for post-Golden Week, so capacity will be tight. Furthermore, equipment shortages continue to be a pain point, too.

Thanks to Collyer Logistics for this article!  We will continue to monitor this developing situation. I know that it is greatly impacting my clients. It is cheaper to ship 18 CBM via LCL than FCL from Qingdao to Los Angeles which in my world is upsidedown. The carriers are making up for lost revenue due to COVID19 on the backs of the Consumers.  

*Update*

  

Two carriers have suspended their plans for general rate increases (GRIs) on the trans-Pacific eastbound trade. Both OOCL and COSCO Shipping are no longer moving forward with their Sept. 15 GRI, and have alerted shippers that rates are extended through the end of the month for the China, Taiwan and Korea trades. Southeast Asia GRIs are still in place. It is reported that other major carriers are also cutting GRIs by $100-$250 per FEU.

 The move comes after Friday, when Chinese regulators encouraged carriers to cap; or at least limit increases, on spot market rates. The regulators also asked carries to consider adding more capacity into service. Concern is now placed on the Oct. 1 GRI and the carriers that have already filed for the increase, as well as those that have planned blanked sailings during the month. This puts both rate and capacity pressure on shippers trying to move their shipments before the Golden Week holiday, October 1-7. Regarding blank sailings, we have not seen other carriers follow the lead of COSCO and OOCL to reinstate originally planned capacity reductions.

It is a move in the right direction :) 

Sue Fitzgerald, GM, Dove Shipping

281-328-4100

[email protected]