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CONTAINER PREMIUMS: Trans-Pacific premiums flat as market braces for August rate hikes

Highlights

Prompt bookings into USEC 'significantly north' of $20,000/FEU

Southeast Asia-US rates to increase

Trans-Pacific all-inclusive premium services held largely firm during the week to July 27, but are expected to increase when carriers take first-half August increases, alongside other surcharges.

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Still, premium charges are significantly above base FAK rates, particularly on the North Asia-to-US East Coast routing, where an increased share of cargo is flowing amid US Pacific Coast port congestion.

During the week to July 27, S&P Global Platts heard all-inclusive bookings at just over $20,000/forty-foot equivalent unit on the China-to-US Atlantic Coast trade. Already $11,400 above the Platts' assessed spot FAK rate, sources expect market rates to increase or at least remain firm in the short-term.

One freight forwarder said that prompt, one-off bookings from China to the USEC are now significantly north of $20,000/FEU.

"Everything is melting," a logistics source said. "This whole crisis is going to put some smaller businesses out of business. It's feast or famine."

Booking rates into the USWC are widely expected to lift as vessels leaving congested South China ports arrive en masse, further pummeling an already backlogged port network.

Southeast Asia primed for renewed equipment shortages

Container premiums on the Southeast Asia-to-North America route remained flat during the week ended July 23 but the congestion and vessel delays got even worse, sources said.

For Southeast Asia to East Coast North America, the all-inclusive premium rate was heard at $18,000-$25,000 per FEU and for West Coast North America, it was at $17,000-$20,000 per FEU.

The congestion issues at Vietnam and Indonesia are getting severe with the rise in coronavirus infections. The backlog from China is making the situation worse, sources said.

"There is a huge congestion at Singapore, which is a major transshipment port and it is causing further delays at other ports," a source based in Indonesia said.

The premiums are becoming more common in the South Asia market now as it is seen as the next hotbed for equipment shortages, sources said.

"Market premium rates from India to US are as high as $2,000-$3,000/FEU, over and above the FAK rates which are currently at $9,000/FEU," a source based in Hong Kong said. A further increase is likely in the coming days, the source added.

For Pakistan to the US, the average rate during the second quarter was around $7,000-$9,000/forty-foot high cube container compared with $2,500-$3,500 a year ago, said a source at a digital logistics platform. "It won't be too surprising to see this rate touch $10,000/FEU by the end of this year."

"The customers are paying such high prices, but nothing is certain...so many delays, so many cancellations, I don't know what to tell the customer, they are so angry," a freight-forwarder based in Singapore said. "Sometimes I just want to switch off my phone and run away."