Emergency surcharges and a rising market

The outlook for container shipping may have suggested a softening market, but the current market is surprisingly volatile, with emergency surcharges imposed from 1st June. Here’s what you need to do to protect your supply chain………

At the beginning of the year, Asia shipping forecasts suggested a supply and demand balance on the key Asia/Northern European trade, based on an assumed trade growth of 5%.

But protectionist moves by the US and potential retaliation could halve that growth, meaning a 50% reduction in forecasted global container growth, though any slowdown because of these developments will take time to impact on demand.

It is ironic, that while were considering the possibility of the market softening, the immediate reality is last week’s imposition of emergency bunker surcharges, an increasingly volatile market and falling service reliability by many carriers.

In addition to the ‘emergency bunker surcharges’ carriers are preparing a raft of GRI and FAK rate hikes this month and are hoping to underpin these with PSSs (peak season surcharges) as the traditional peak season approaches.

Protecting our customers from the worst effects of this type of market is why we negotiate deals with multiple carriers and alliances, offering our clients current, quarterly, bi-annual and annual rate options. (Subject to volumes and situation.)

It’s also why we are recommending that shippers lock in rates now or risk higher prices, as carriers may spend the remainder of the year attempting to claw back revenue, which will create further spot market volatility.

Shippers with bigger volumes may prefer to avoid the spot market and negotiate deals with the shipping line directly. But the danger here is they risk the impact of void sailings and slow steaming as the lines soak up excess capacity and drive fleet utilisation up.

Our advice is to avoid the traditional single-carrier strategy and adopt our multi-carrier strategy.

Our planners are advising that service issues may continue to get worse because cargo booked with a high-service carrier may wind up with a low-service alliance partner, which diminishes service differentiation and leads to a downward spiral.

That is why our contingency planning is so important, embracing alternate carriers, alternate modes and alternate ports of loading.

Even if you have historically dealt directly with the carriers for all your cargo needs, we would recommend considering us and benefit from access to the entire global operating fleet.