Asia-US carriers push for spot rate hikes in overheated pre-Lunar New Year market
Ocean carriers on the Asia-US trade are making a last-minute push to implement general rate increases (GRIs) before Lunar New Year in a bid to take advantage of seasonal tightness in an already overheated market compounded by ongoing Red Sea disruptions.
Sources — including importers, carriers, non-vessel-operating common carriers (NVOs) and industry analysts — told the Journal of Commerce the trade lane is seeing proposed GRIs ranging from $600 to $1,000 per FEU meant to take effect on Feb. 1 or Feb. 15. Most sources, however, expect rates will quickly decline when factories in Asia close for about two weeks during the annual Lunar New Year celebrations that this year begin on Feb. 10.
Carriers are attempting to capitalize on tight vessel space at Asian load ports as well as the uncertainty over how long they will be forced to divert all-water services to the US East Coast around the southern tip of Africa due to the ongoing attacks against commercial shipping in and around the Red Sea by Houthi militants based in Yemen.
“They’re throwing a lot out there to see if it will stick,” James Caradonna, executive vice president of forwarder M+R Spedag Group, told the Journal of Commerce. “We’ve been through this in the past when carriers tried to increase rates and they didn’t stick.”
Carriers implemented GRIs earlier this month and the increases held. The East Coast spot rate as of Jan. 24 was $6,166 per FEU, up from $4,050 on Jan. 5, according to Platts, a sister company of the Journal of Commerce within S&P Global. The West Coast spot rate of $4,100 per FEU is up from $2,800 on Jan. 5.
Current increases are taking hold in a pre-Lunar New Year market where demand is strong, with bookings likely to remain robust for the next couple of weeks, said David Bennett, chief commercial officer at the forwarder Farrow. Carriers are attempting to boost rates any way they can, he said, including through GRIs, peak-season surcharges (PSSs), war-risk surcharges and Panama Canal surcharges.
“Everybody’s throwing something out there,” Bennett said.
“Space is tight to the West Coast. It’s even tighter to the East Coast,” added Rachel Shames, vice president of pricing and procurement at the forwarder CVI International.
Rate increases in Asia-US trades vary widely
The actual spot rate increase that importers are paying varies widely based on carriers’ contracts with their individual customers. Carriers are generally not charging customers PSSs when the contracts specifically prohibit PSSs. However, those customers may be hit with Panama or Suez Canal surcharges on all-water services from Asia to the East Coast, Shames said.
“I don’t know if [importers] can take another increase, but the carriers are definitely trying to get one,” she said.
Retailers with a clause in their contracts prohibiting peak season surcharges are still shipping under their much lower contract rates as long as they have not fulfilled the minimum quantity commitments in their 2023-24 service contracts that run through April 30, said a former logistics manager at two national retailers who now works as an industry consultant and spoke on the condition of anonymity.
That point was confirmed by an importer in the automotive sector. “We are not getting any new GRIs – just what [carriers] tried last month,” said the source, who did not want to be identified.
Source: Journal of Commerce
Explore Farrow’s CARM page.
