Container lines implement surcharges amid slowdown on COVID-19, Lunar holidays

Singapore — Container transportation and shipping companies worldwide are implementing surcharges or contemplating to do so on backhaul routes to Asia as the coronavirus, or COVID-19, outbreak has created operational challenges in shipping amid reefer plug shortages in China caused by the extended Lunar New Year holidays.

"There have been hiccups since the beginning of this month," a shipowner said Thursday. "We hope the phobia will die down and confidence is restored soon," he added.

Another shipowner said that they will park the containers temporarily at Hong Kong, Japan, or South Korea until there are ample reefer plugs available at the destination Chinese port.

Reefer plugs are used in refrigerated shipping containers that transport temperature-sensitive cargo.

The shipowner also said that his company does not plan to implement a surcharge yet, but will work out additional costs with the importers and then contemplate such a move.

But there are some who have already announced surcharges.

CMA CGM, for example, on February 13, announced surcharges for freight all kinds, or FAK, reefer rates from North Europe, Baltic, Scandinavia, Poland & West Mediterranean to China, Hong Kong SAR, North & South Asia base ports.

The rates will apply from March 1, and range from $4,700 to $5,700 per container, it said.

It also announced an increase in FAK reefers rates from South America East & West Coasts and Central America to Asia from March 1.

"Rapidly rising operational costs and a reefer plug shortage in Shanghai, Xingang and Ningbo caused by the extended Lunar New Year holidays – have regrettably forced us to undertake various special measures for reefer transports to Mainland China," Hapag-Lloyd said this week.

This includes diverting cargoes to other terminals or ports that currently do have adequate reefer plug availability; waiting for further transit; returning your reefer containers to their port of origin; or keeping them on board to arrive at the port the destination on the vessel's next voyage, it said.

This comes after Hapag-Lloyd, on February 14, announced a peak season surcharge of $325 per container on all boxes from North Europe to Asia, effective March 1.

The ocean tariff rates as well as bunker-related surcharges, security-related surcharges, terminal handling charges remain unchanged respectively as announced but other local charges and contingency surcharges may apply in addition, it said last week.

For South Europe, Mediterranean and Black Sea to East Asia, the company said that it was levying a peak season surcharge of $350 per box from March 1.

Meanwhile, Ocean Network Express, or ONE, last week said that some Chinese terminals, especially Xingang (Tianjin) and Shanghai were already facing a serious shortage of available reefer plugs.

"In an effort not to compound the operational constraints and to maintain the safest operation possible under these circumstances, ONE will encourage customers to consider a change of destination to other alternative ports, especially for time-sensitive cargoes such as fresh, chilled commodities," it said.

At the same time, ONE has decided to apply a congestion surcharge of $1,000 per container to cover additional costs related to the unexpected but necessary arrangement of shipments and associated plug-in charges, monitoring fees and the like, it said.

This measure is effective immediately for all reefer cargo arriving into Shanghai and Xingang from February 15 onwards, and for regulated trades the effective date will be March 14, it said.

Crew shortage

To make the matters worse, apart from the reefer plug shortage, there is also shortage of crew as ships are reluctant to call on Chinese ports. China is one of the largest supplier of crew personnel on ships. Crew are deployed on container lines for a specific duration and then have to be replaced or renewed under a schedule governed by international maritime laws.

Port restrictions have made crew change difficult and the fluid situation makes crew coordination efforts futile, Christina Cheh, Vice President for global health, safety, environment and quality at Wilhelmsen Ship Management told S&P Global Platts earlier this month.

"Until the best solution is found, we have extended the current crew contract within the limits of the MLC [Maritime Labour Convention]," Cheh said.