Cash-starved container lines are pressing ahead with a second round of freight rate rises in the Asia-Europe trades.
Cash-starved container lines are pressing ahead with a second round of freight rate rises in the Asia-Europe trades after unexpected success in lifting box revenues at the start of the month.
Several carriers have already announced peak season surcharges that will come into force next month, or are considering additional increases, buoyed by stronger cargo volumes from some parts of Asia.
Space is said to be at a premium on sailings out of northern and eastern China, giving lines greater leverage in negotiations with customers.
Spot rates have gone up by an average of around $200 per teu since the beginning of July, boosting confidence that the market can absorb further adjustments.
Maersk Line and CMA CGM have each signalled a $150 per teu peak season levy from August 1. K Line is planning a surcharge of $125 a teu for Asia-north Europe cargo and $145 for Mediterranean-bound freight. Mediterranean Shipping Co is said to be targeting an August 15 increase and other lines are expected to follow suit.
?We will see how things play out over the next couple of weeks, but we are looking at it,? the trade director of a major carrier said Tuesday.
Other lines agreed that there was further upwards potential, given better market conditions that have caught many by surprise.
?The July 1 increase went better than we had anticipated,? one source said.
?Overall, the market is strong at the moment,? a second observed.
Rate rises are finally sticking
Rate rises ?are finally sticking?, added another Asia-Europe trades manager.
The huge amount of capacity taken out of service has brought supply and demand into close balance, with some ships now fully laden.
Lines are experiencing a traditional summer upturn in exports from Asia as European importers prepare for Christmas shopping and replenish low inventories.
One line said Asia-Europe volumes in the third quarter were likely to be some 10% higher than in the second quarter. That should help to limit the year-on-year drop in traffic.
The European Liner Affairs Association estimates that westbound liftings from Asia were 22% lower in the first three months compared with the same period of 2008, with the May figure down 20%.
But by the second half of 2009, the year-on-year drop could be down to single digits, according to one line"s internal forecasts.
Average spot ocean rates, which came close to zero earlier in the year, are now back to around $400-$500 a teu. This is still well down from levels a year ago of about $700 and only a third of rates prevailing in 2007 when shippers were having to pay up to about $1,400 a teu in a red-hot market.
When bunker and currency surcharges along with terminal handling fees are included, total spot rates are now about $1,500 per 20 ft container.
But although lines are still losing huge sums of money, shipper representatives have reacted with astonishment to the planned summer surcharges.
?This seems at first sight completely staggering,? said Shippers" Voice director Andrew Traill.
?Shippers worldwide must be asking themselves how on earth the lines can justify a peak season surcharge when the trades are so depressed. We may have hit the bottom of the decline in volumes and be seeing a small seasonal increase but can this really be sufficient to increase the volumes to anything remotely approaching even the throughput encountered at off-peak times before the recession??
Dr Traill warned that shippers would not accept a surcharge just because it was the start of the summer, when traditionally traffic throughput increases.
?These are not normal times and normal practices ? if you could indeed ever say applying a surcharge because you were busy was normal practice ? cannot surely apply today,? he said.
For lines, the main concern is whether some carriers may jeopardise the fragile improvement by reactivating laid-up tonnage, and if higher rates can be sustained towards the end of the year when cargo volumes usually slacken.