Carriers force through rate hikes and prevent new ‘race to the bottom’

By Mike Wackett 11/12/2023

Ocean carriers are mostly holding the line on the huge mid-December and 1 January Asia-North Europe GRIs (general rate increases), and appear to have finally turned the corner with their rate restoration drive.

Encouraged somewhat by the carriers themselves, for the past few months several China-based forwarders have been undercutting agreed rates with the lines, in order to secure additional spot business.

In most cases, the carriers have hitherto been prepared to discount rates further, in order to hold market share, which in turn has emboldened forwarders to offer even cheaper rates in a classic ‘race to the bottom’ , similar to that which, in 2016, led to the demise of Hanjin Shipping.

While carriers were still living off respectable H1 results, underpinned by a legacy of high contract rates, they could afford to top-up ships with low-rated spot market cargo. However, disappointing Q3 results and a dire outlook scenario from Q4 onwards has brought a reality check to liner boardrooms in Europe and Asia, not least prompted by investor concern.

Indeed, notwithstanding the huge cash reserves built up during the post-pandemic boom, shareholders have been unsettled by the predicted pace of the cash burn of carriers’ mid- and long-term profitability.

Underpinned by a massive blanking programme, the diversion of some services around the Cape of Good Hope, due to war risk in the Red Sea, and not least a pick-up in demand ahead of Chinese New Year (CNY) on 10 February, the rolling out of GRIs has been well executed.

It has obliged shippers to scramble for space for the remaining export slots from China prior to the year end, with the best deal, seen by The Loadstar this morning, of $1,600 per 40ft, ex the main Chinese ports to North European hubs, via Evergreen, valid until 31 December.

This compares with rates being touted just a week ago, through Chinese forwarders, of just $1,000 per 40ft, apparently via a range of carriers.

Thereafter, Maersk, which had previously been blamed in certain circles for discounting rates via its online platforms, is offering $2,100 per 40ft from China hub to North Europe hub, valid until 5 January.

Meanwhile, a UK importer contact told The Loadstar his ‘new’ 20ft rate from Dalian to Felixstowe had soared from just over $400 in November, to $1,200, with revisions this morning from several carriers taking the rate up to $1,600 per 20ft.

Moreover, The Loadstar understands several carriers are considering the introduction of a peak season surcharge in January, in order to reflect an expected tight booking situation prior to CNY.

This could also see the resurrection of ‘premium’ surcharges on the route, last seen during the supply/demand crunch of 2021 and early 2022.

Maersk is, in fact, currently rolling this out for its Indian export services offering a PQC (premium quality container service surcharge) “from India to the world”, for an additional $100 per 40ft.

Maersk’s advisory does not clarify what shippers receive for the PQC – such as priority booking or guaranteed provision of equipment – but said it was an “optional product” that could be selected at the time of booking.