All-inclusive premium bookings heard in the US marketplace inched upwards during the week to Aug. 27 as port congestions on both sides of the Pacific supported market rates, and booking levels soared as shippers in China attempted to outbid one another.
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Fallout from the recent port closure in Ningbo provided support to rates during the week. While the affected Meishan terminal has been opened, sources said existing cargo backlogs and vessel bunching will continue to exacerbate supply chain slowdowns.
"From an official perspective, FAK rates have hit a ceiling, from a reality perspective, that's not true," a carrier source said, noting that many bookings were auctioned by coloaders and forwarders in China. "Carriers have come under scrutiny of the Chinese government, yet forwarders can get an $8,000/FEU quote and charge $25,000/FEU, and no one bats an eye. Forwarders are still common carriers; we do similar things."
"Chinese government is keeping a lid on rates, but unfortunately ... that is creating a black market for rates," said a North American freight forwarder source. "Chinese forwarders auctioning rates higher and higher."
During the week, S&P Global Platts heard a trans-Pacific all-inclusive booking at $18,000/FEU on the North Asia to USWC routing. North Asia – USEC bookings remain at a plus $2,000 to $3,000 spread to those bound for the USWC, but have been heard at $25,000/FEU, and above, in some cases.
At the same time, market players on both sides of the supply-demand balance expect further rate increases in September.
"We have been talking to Chinese authorities, will have chance to increase premiums effective Sept. 19 by $1,500/FEU," another trans-Pacific carrier source said during the week.
Vietnam delays pushing premiums higher
With the shutdown at major Vietnamese ports persisting for over a month and delays at the transshipment ports getting worse, premium rates in Southeast Asia and South Asia were strengthening each day.
The much dreaded $30,000/FEU price was finally heard on the Southeast Asia to West Coast North America trade lane, where prices have so far remained between $18,000/FEU and $20,000/FEU.
"This may just be a one-off case as prices haven't gone that high but it's not unrealistic at all, not in the current market where people want equipment at any cost," an industry source based in Hong Kong said.
For Southeast Asia to East Coast North America, the all-inclusive premium rates remained stable at $20,000-$25,000/FEU.
"The overall situation hasn't improved but it hasn't gone worse either. That kind of evens out the pain," a source based in Shanghai said.
However, the situation seemed to be getting worse in Vietnam, where the majority of ports have been operating at a curtailed capacity for over a month now and shippers are facing a huge shortage of equipment.
"The coronavirus cases in the country are increasing and Hanoi and Ho Chi Minh remain under lockdown. The business is also suffering ... there are no equipment at even those ports which are fully operational," a freight forwarder based in Vietnam said.
At Singapore, one of the largest ports in not just Southeast Asia but the entire world, the delays and congestion were rampant, so much so that exporters in other parts of Asia were shying away from shipping goods via Singapore.
"The transshipment port of Singapore remains a big challenge, it's highly likely to the shipment to get stuck there for weeks and even for months," a freight forwarder based in India said.
The premiums have become deeply rooted in the Indian market and rates have risen multiple fold over the past few months.
"For shipments to US, the current rate is around $15,000 per FEU, including a premium surcharge of $1,000-$1,500 against nearly $4,000 per FEU a year ago," an exporter based in India said.
Asia-Europe carriers eye increases
Rates from Asia to Europe remained supported on the week, despite the positive news on the reopening of Ningbo port, with little movement seen on a FAK basis. Despite this, ship queues at major European ports started to grow slightly, prompting some cargo owners to pay slightly higher premium rates from Asia to UK of almost $19,000/FEU.
"We are seeing them push rates even higher," said a UK-based freight forwarder. "Unlike our trans-Pacific friends, we can't and simply won't pay premiums over the FAK rates along this route, we are already bleeding. The idea of paying even more than the carriers are asking FAK is just too much for most of my customers."
As a result of this sentiment, which carries through much of the European market, most trade from Asia to Europe was still being done on a FAK basis, with PCR1 -- North Asia-to-North Continent -- assessed at $17,000/FEU on Aug. 27, and PCR11 -- North Asia-to-UK -- at $18,500/FEU, maintaining the premium of $1,500/FEU from a week earlier.