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Container Premiums: Trans-Pacific spot rates escalate as cargoes pile up

  • Author
  • Greg Holt with Staff
  • Editor
  • Bill Montgomery
  • Commodity
  • Shipping

Shippers have bid trans-Pacific eastbound spot container shipping rates above $15,000/FEU from Asia to the US East Coast as they become increasingly worried about moving cargoes out of rapidly filling Asian warehouses and factories.

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One major US retailer offered to pay $15,000/FEU for each of 100 containers loading in June to any freight forwarder that could allocate the space on ships leaving China for the US, a US-based freight forwarder said.

"In 15 years in this industry I've never heard of such a thing," the freight forwarder said, adding that shippers "were trying to increase their volume allocation in contracts this year, but most got a decrease of 20-25%. Now all that cargo is being dumped into the premium market."

Rising concerns over backlogs

Despite paying spot rates that are more than a fivefold increase from the year-ago spot price of $2,550/FEU, many shippers are even more concerned about paying storage at Asian warehouses for goods that can't be shipped at any price as space on ships going to the US is fully booked for weeks in advance, the freight forwarder said.

Offers from shipping lines including premium service fees in the week to May 29 were $12,000-13,000 for June shipments from East Asia to the US West Coast and $15,000-16,000/FEU to the East Coast, market sources said.

Shipping lines were also looking to increase Freight-All-Kinds (FAK) base rates in June in order to dampen the sticker shock from escalating premium surcharges, another US-based freight forwarder said.

"Premiums are slowly becoming FAK rates, but the premiums are also increasing," the freight forwarder said. "Customers were telling us until recently to pay anything up to $15,000 per container, but for anything higher to come back and check. Now they are telling us the price is not the issue anymore."

Trade from Asia to Europe continued to be done on FAK basis over the course of the week, with importers shrugging off the premium pricing mechanisms seen on the other major global trade lanes.

Despite this, rates remained largely stable on the week, with demand continuing to stretch well into the second half of the year and space on vessels remaining scarce into June and the first half of July.

"We've topped out for now, it seems. No reason to push higher as we enter June, but similarly, limited reason to fall," a carrier source said.

Even premium cargoes get rolled

Platts Container Rate 1 -- North Asia to North Continent -- was assessed at $12,000/FEU on May 28, unchanged on the week from its all-time highs, highlighting this sentiment.

"We aren't able to go over our nominated cargo volumes, no matter how sweetly we ask," a shipper said. "If we ask our carriers for more space, they say we have to pay the spot prices, which are very high. Despite this, though, we haven't seen too much cargo being rolled in the last few weeks apart from on those vessels that are taken out of their strings."

In Southeast Asia, shippers were willing to pay premium rates as high as $12,000-$14,000/FEU to East Coast North America and $9,500-$11,000/FEU to West Coast North America to get their goods across. These all-inclusive premium rates were more than double the FAK rates, which were assessed at $5,650/FEU for Southeast Asia to East Coast North America and at $4,600 for Southeast Asia to West Coast North America on May 28.

A source at a logistics company called FAK "useless, as only premium rates can get the space."

Even after paying these premium rates, there was no certainty on when the goods would be shipped because some priority cargoes were still getting rolled over at least two to three times, a logistics provider said.

The high premium rates are likely to translate into higher FAK rates for June, a source said.