The global container shipping market has not been able to recover as anticipated this year and the industry continues to grapple with the enormous stress brought about by covid-19 and unpredictable consumer behavior. It is with concern that we monitor new outbreaks near major container ports in southern China as any disruption in outbound freight affects the circulation of vessels and containers around the world.
It takes much longer for each containership vessel to complete a voyage, and this ties up equipment and available weekly space for any new cargo. This has eliminated any possibility of a buffer to handle the typical disruptions that occur in freight transportation. In connection, freight rates continue to surge leaving shippers to decide whether to lose sales or pay highly elevated rates.
Shippers already were dealt a round of emergency surcharges in March of this year, followed by rate increases in April. This cycle is happening again with a round of surcharges in June followed by rate increases in July.
Effective July 1, 2021 container rates will increase from all origins to the USA. Expect additional costs up to $2,500 depending on origin countries and type of equipment (dry vs reefer).
When will it end or will the U.S. government step in? The container shipping industry in the United States is regulated by the Federal Maritime Commission (FMC). They can challenge carriers in court if the unreasonably high costs are due to anti-competitive behavior.
According to Dan Maffei, Chairman of the FMC, “High price in and of itself is a not a violation of the Shipping Act. We don’t set rates and we can’t dictate the levels of service. But the key is that when you’re at or beyond the capacity of the system, it’s very difficult to prove that if only this [carrier consolidation] didn’t exist, prices would be lower. Because the fact is that it’s simply supply and demand. If demand is high and supply remains fairly limited, then that [high prices] is what happens.” Read full article from American Shipper “Why stratospheric container rates could rocket even higher.”
Even though advance forecasting is difficult right now, providing as much lead time on orders remains essential. We continue to work with carriers to prioritize space and equipment for your shipments in this extremely tight market. For questions on the impact to your shipments, please reach out to your Hillebrand local representative.