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Container Premiums: Trans-Pacific surcharges escalate amid shortage of available space

Premium service surcharges applied by many container shipping lines on the spot market have brought all-in rates above $10,000/FEU for prompt shipments from North Asia to the US East Coast amid a shortage of empty containers and space on ships.

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Premium services were originally offered by shipowners as a guarantee of priority loading and unloading at ports and expedited transfer to truck and rail. More recently, premium services only guarantee a cargo will make it on the voyage booked as shipowners face heavy port congestion, equipment shortages and other supply chain constraints that have intensified over the last nine months.

Spot rates from China to US East Coast ports such as New York/New Jersey and Savannah, Georgia, were in the $11,000-$12,000/FEU range this week for June shipments, the highest levels they have ever been, a US freight forwarder said.

Freight-all-kinds spot rates, which bring a higher risk of a cargo getting "rolled" or bumped to later voyages, were assessed for North Asia-East Coast North America at $6,200/FEU on May 14, far below spot rates that include premium services but still a 130% increase from $2,700/FEU on the year-ago date.

"Chinese regulators stepped in back in October to warn carriers about rising FAK rates, but carriers found other ways to charge more," the US freight forwarder said. "With all the disruptions and operational issues we are having, all carriers increased trans-Pacific FAK rates on May 1 and could do another rate increase in June. But this is expected to coincide with decreases in the premium surcharge fees."

Premium rates for other trans-Pacific trade lanes have similarly climbed to unprecedented levels. Spot rates with premiums from China to the US West Coast are in the $8,000-$9,000/FEU range, with FAK rates for the route assessed at $4,700/FEU on May 14.

Southeast Asia equipment shortage worsens

A spot deal was done to ship a cargo from Southeast Asia, where shippers are facing an even greater shortage of empty containers at some ports than in China, to the US East Coast at $13,000/FEU including premium service fees, a US freight forwarder said. Premium rates from Southeast Asia to the US West Coast were in the $8,000-$9,000/FEU range, same as from North Asia.

FAK rates from Southeast Asia to East and West Coast North America were assessed on May 14 at $5,450/FEU and $4,550/FEU respectively.

Shipowners were charging spot rates with premiums from South Korea to Houston at $9,700 for a more compact twenty-foot container loading in June, a polymer resin trader said. A similar shipment from China to the US Gulf was quoted by a shipowner at $17,000/FEU including premiums, a US chemical supplier said.

Premium rates from Ho Chi Minh City, Vietnam, to Atlanta were up to $15,000/FEU including inland transport fees, another US-based freight forwarder said.

Europe sees FAK hikes instead of premiums

In the European market, premiums from Asia to Europe still appear to be the exception to the rule, rather than the rule itself.

Carriers have once again opted to increase FAK rates across the board, adding in relevant surcharges for trade imbalances, container equipment shortages, and peak season demand. As a result, Platts Container Rate 1 -- the all-inclusive container rates from North Asia-to-North Continent -- was assessed at $10,500/FEU on May 14, up $1,000 from a month earlier as these increases took hold in the market.

"There are still huge backlogs of cargo in Asia," said a freight forwarder, highlighting his expectation that these firm rates will continue for some time. "Demand is constant, but capacity could be coming back as ships return to rotation. In June, the capacity situation could improve with some potential easing of rates, or more likely a plateau."