Market Conditions – We know it sounds like a broken record, but as the August 1st general rate increases went into effect, the market has set all-time record highs once again. The increases, coupled with several ocean carriers filing port and rail congestion surcharges also effective August 1st, have sent shipping costs to unthinkable levels. The highest cost shipments are to be found on what ocean carriers would consider “undesirable destinations”. These are destinations where there are poor export match back opportunities or now, more importantly, extremely long equipment turn times due to rail congestion. By far intermodal shipments are having the most difficultly finding their way onto vessels. We are seeing premium market rates to certain locations over $25,000 per 40’ and this does not include any applicable port and rail congestion surcharges.
These extremely high shipping costs are forcing importers to prioritize purchase orders that are essential for the upcoming holiday season or simply have no choice to ship due to low inventory levels. Shippers will wait until after peak season for orders that are less essential, however there is no guarantee freight rates will drop off dramatically after the peak as global port congestion and Covid related bottlenecks continue to reduce weekly capacity. As peak season continues, we expect port congestion only to increase as ocean carriers limit USIPI cargo, placing additional pressure on port capacity as local deliveries spike. Will Southern California chassis, dray, and warehouse capacity buckle under the weight later this month and into September? With over 20 container vessels now at anchor it seems increasingly likely.
Market Rates – The August 1st GRI was universally applied across the board by carriers to inland destinations as ocean carriers restrict supply in favor of local port container volume. The increase again varied by carrier, however in general increases were between $500-$1,000 per 40’. A sharp increase on premium rates was evident from South China to all US destinations with rates of $15,000+ to USWC ports, $17,000-20,000 to USEC and USIPI at $25,000+, all of which are subject to the ingate congestion surcharges that went into effect on August 1st. Will we see another rate increase on August 15th? Ocean carriers have already announced another round of increases along with a couple carriers poised to increase congestion surcharges significantly - how much more will the market bare? We think we are nearing that threshold based on how shippers are prioritizing orders now. Time will tell if we see the premium market finally level off.
Asia Covid Spike Threatens Production – The recent spike of the Delta variant throughout Asia is quite concerning and many nations are reporting record daily highs such as Vietnam, Malaysia & Thailand. As governments attempt to limit the spread, commercial hubs will likely see further constraints put in place that will impact supply chains. Vietnam factories have already been forced to temporarily suspend production and port congestion is increasing which will limit the availability of equipment and the potential for blank sailings remains.
For over 70 years, Laufer Group International Ltd. has been helping customers improve the way they handle their logistics. To see how we can help, or for any questions, contact Brian Martorano, National Director of Business Development, Ocean Import or contact your local sales representative.