CONTAINER PREMIUMS: Voluntary rate increases shove trans-Pacific bookings to fresh highs

Voluntary rate increases on the part of shippers and freight forwarders have artificially supported freight rates on the trans-Pacific eastbound trade, as market players compete with one another to secure any available vessel slots.

"If we offer $10,000 per container to the US East Coast, companies will come and offer $12,000 to $15,000 instead," a carrier source said. "Every time I'm meeting with an import customer, the one phrase I keep hearing is 'what's it going to take.'"

And many carriers were heard accepting almost exclusively premium bookings during the week, as all-inclusive rates continued their northerly trek.

During the week to Sept. 2, S&P Global Platts heard premium bookings from China to USEC at just over $18,200/forty-foot equivalent unit, for loading three to six weeks ahead. On the same lane, more prompt 10-day to two-week booking windows were heard in the $22,000/FEU to $25,000/FEU range.

Rates into the US Pacific Coast were a bit milder, and Interior Point Intermodal loadings for as low as $14,000/FEU were heard. Still, spot booking rates sit at a large spread to the base Freight All Kinds rates seen in the marketplace, which were adjusted upwards Sept. 1. Platts Container Rate 13 – North Asia to West Coast North America – was assessed at $9,000/FEU on Sept. 2.

"At the end of the day, the rates published do not matter," a US-based co-loader source said. "Every vessel, every sailing is its own pricing scheme."

Intra-Asia premiums spike on delays, capacity constraints

Premium rates remained firm on not just the long-haul Southeast Asia-North America route but the intra-Asia trade as well.

The premium rates were heard in the $19,000-$25,000/FEU range for Southeast Asia to US East Coast and $17,000-$21,000/FEU for US West Coast, largely unchanged week on week but prone to several changes in booking conditions, loading and arrival times.

While some sources believe that the rates have peaked and further increases are unlikely, some other say that the all-inclusive rates may go as high as $30,000/FEU.

"I have not heard of many shipments being booked at $30,000 per FEU but nothing is impossible in the current market," a logistics provider based in China said. Space remains a major challenge and there is no immediate solution in sight, he added.

Meanwhile, equipment shortages in Vietnam are getting worse by each day as careers blank sailings amid the lockdown restrictions in the country.

"COVID infections are high in northern Vietnam, but southern Vietnam, where most of the manufacturing units are located is in a better situation." a freight forwarder based the country said. "Carriers are still omitting those ports and blank sailings and shortages are making things difficult for the exporters."

As several parts of Vietnam have remained in a lockdown for over a month, carriers are shifting capacity to ports in China, leading to an ongoing equipment shortage and concerns of a huge pile up in the coming months, sources said.

The container shortages and vessel delays resulted in premiums getting stronger on intra-Asia routes, especially out of South Asia.

Prices from India West Coast to Middle East increased by nearly 30%-40% week on week to $1,000/TEU and $1,700/FEU. Rates on India-US East Coast route also continue to register growth with current prices heard around $15,000-$16,000/FEU, nearly four times higher than a year ago.

Indication of premiums developing in Europe

Premium service fees have been creeping into the all-inclusive rates paid by shippers from North Asia to Europe in recent weeks as there has been an escalation in demand for space on ships that can deliver cargoes in time for the end-of-year shopping season.

"Premiums are generally in the $500-$700/FEU range and have started become much more common since peak season began in August," a freight forwarder based in Germany said. "It isn't really the right style. When you are buying a pair of jeans you expect to pay the price on the tag, and it would be off-putting to find that there were hidden costs when you get to the cashier. But that is what shipping markets have become."

Still, premium surcharges remain a small part of the overall cost of shipping a container from North Asia to North Continent, which was assessed on an FAK basis at $18,000/FEU on Sept. 2. The premiums are used more as a means of shipping lines implements some or all of an upcoming GRI on the spot market amid overwhelming demand, rather than the thousands or tens of thousands paid in premiums paid by trans-Pacific eastbound shippers on top of the quoted FAK rates, the freight forwarder said.