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CONTAINER PREMIUMS: Surcharges widespread amid equipment shortages, congestion

Highlights

Premium fees for Asian export cargoes commonplace amid empty container shortage

Priority fees emerge for Mediterranean discharge as demand strengthens

All-inclusive trans-Pacific container shipping rates to North America strengthened in the week ended Dec. 3, as shortages of equipment and carrying capacity in North Asia worsened amid steady demand from cargo loaders.

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Premium rates were offered in a wide range by various shipping lines but were mostly $12,000-$14,000/FEU for shipments from China to the US West Coast and $16,000-$18,000/FEU for sailings to the US East Coast.

One major shipping lines with the greatest abundance of empty containers and space on ships leaving North China ports was also asking the highest rates at around $18,000/FEU to West Coast North America and more than $20,000/FEU to East Coast North America, including premium service fees.

"From South China there is more opportunity to move cargoes on FAK rates, while from central and North China there may be premiums depending on the loading date," a US-based freight forwarder said. "From anywhere else such as Korea, Thailand or Vietnam you will get more premium offers than FAK."

A Canadian freight forwarder said demand from retailers restocking ahead of Lunar New Year is a normal seasonal trend that has been exacerbated by the difficulty in returning empty containers to Asian export hubs, particularly from the West Coast of North America. The Los Angeles/Long Beach port complex has been inundated with record volumes of boxes coming in and out for months, while the Port of Vancouver is struggling to resume normal operations since rail networks to the port were washed out by floods in mid-November.

"We were already in a crisis and now it's become even worse," the Vancouver-based freight forwarder said. "There is so much rail cargo in terminals that they can barely unload any ships. It will be months before we dig out of this hole."

While not explicitly quoted as a premium rate, one shipping lines was asking $16,500/FEU for a China-to-West Coast South America booking, a freight forwarder based in Chile said. Other offers for the route were in the $12,000-$14,000/FEU range, but without any guarantee of space and equipment.

Equipment imbalance supports premiums from Southeast Asia

The premium rates for containers were largely unchanged on the Southeast Asia-North America route amid tepid trade, but sources say signs of an upcoming rush and equipment shortage have started to emerge.

All-inclusive freight rates from Southeast Asia were heard at $16,000-$19,000/FEU to East Coast North America and $15,000-$16,000/FEU to West Coast North America.

"The market has been quiet for last few weeks as most of the Christmas bookings have been placed, but the coming weeks will be interesting as shippers rush in to make bookings before the Lunar New Year," a source based in China said.

The resurgence of coronavirus infections has added to the woes of shippers from Southeast Asia.

"The equipment shortage has gotten worse and prices also seem to be moving up in the coming days," a Vietnam-based source said coronavirus infections and holiday rush look like the reason.

Congestion and cargo backlogs at transshipment hubs in Asia also signal that logistical challenges and price increases are in the offing. Premium surcharges may continue to rule the markets at least for the first half of 2022, sources said.

The fact that coronavirus is still around with many areas in Europe going into back lockdown, and the US and other regions susceptible to disruptions too, makes it look like the premium surcharges will remain, a carrier source said.

"Unless the availability of vessels and empty containers improve, there will always be too many cargoes for carriers to choose from," the carrier said. "Shippers will obviously need to pay premiums to get timely loading."

But premium fees have decreased on the India-to-US East Coast route as NVOCCs have put more of their equipment back into rotation, boosting supply while demand has been week since the Diwali holiday in November, sources said.

"Carriers see the Chinese and Southeast Asian markets as their big money makers and will continue to prioritize them," a freight-forwarder based in India said, adding this will eventually cause another shortage of equipment in the subcontinent.

Some shipping lines might avoid congestion at US ports for a short period and divert some capacity to the Africa, Australia and Middle East markets until premium rates for shipments to the US surge again, the freight forwarder added.

Premiums emerge for priority Mediterranean shipments

FAK bookings continued to take up the lion's share of market activity in the Asia-Europe trade during the week, although some premium levels were heard for priority loading, particularly for Mediterranean discharges.

"There's a lot of pressure on the market right now. Only high value cargoes are being loaded," a Mediterranean carrier source said, noting that volume projections up to and after the Lunar New Year remain strong, which should lend ample support to higher freight rates.

All-inclusive rates from North Asia to the Mediterranean were heard at the $15,700/FEU level, while FAK rates trended lower, with a floor around $14,000/FEU.

In the North Continent and UK markets, bookings from Asia were all being done on FAK bases, albeit at near record high rates. While FAK rates edged downward during the week, most sources expect a pick-up in the first half of December and into January as the Lunar New Year holiday in February comes into view.

Platts Container Rate 11 – North Asia-to-UK – was assessed on Dec. 3 at $17,250/FEU, down $500 on the week. Freight bound for the North Continent also fell, ending the week at $15,750/FEU.