The shipping company ignores the contract! The owner and freight forwarder were angry......

2024-06-01 09:00

Freight rates have soared recently and are set to rise in June, with shippers and freight forwarders at their peak as they can't afford a sharp rise in spot freight rates.

April and May every year are the off-season for foreign trade in the traditional sense, but this year, not only is the off-season not weak, but the price of sea freight has also soared, setting a record since September 2022...

Airline prices have risen wildly

Freight forwarding industry insiders recently revealed that the booking situation of European and American routes has been tight until the beginning of June, and shipping companies seized this opportunity to announce an increase in freight rates on June 1.

Specifically, the U.S. freight rate increased by about $1,600 again (including peak season surcharges), while the European freight rate increased by $1,000 to $1,200. This adjustment made the freight rate of the European route and the West US route break through the $6,000 mark in one fell swoop, and the freight rate of the East US route exceeded $7,000.

In the last week of May, freight forwarders may struggle to secure space even if they increase the price by $500 to $1,000 due to the extreme scarcity of space. At this time, the shipping company decided the allocation and price of space according to the customer's transaction records, and the market obviously entered the seller's market.

The Shanghai Container Freight Index (SCFI) reported a further increase on the 24th, rising 7.25% to 2,703.43 points, a new high since September 2022.

The freight rates of the four major ocean routes continued to rise, among which the freight rates of the European route increased the most, reaching 11.77%, the Mediterranean route rose 7.35%, the US East route rose 7.57%, and the US West route rose 3.26%.

Drewry's World Container Index (WCI) also rose a further 16% last week, reaching $4,072 per FEU on May 23, sustaining a significant increase throughout May and 142% higher than the same period in 2023. This follows gains of 11% and 16% in the weeks to May 16 and May 9, respectively.

Xeneta, a price comparison platform for ocean freight services, said that with the impact of the tightening of shipping container capacity, the price of freight spot prices has increased by about 30% in the past few weeks, and it is trending upward. Xeneta warned that freight rates could continue to rise in June, and that the increase would be "sharp".

In just five weeks from April 26 to the present, the freight rate of the European route has increased by 72.96%, the Mediterranean route has increased by 39.37%, the US West route has increased by 63.43%, and the US East route has increased by 59.22%.

This wave of freight rate increases is mainly due to the early arrival of the peak season on the European route and the strengthening of inventory replenishment in the United States, which led to an increase in seaborne cargo volume. At the same time, in order to reduce the impact of rising freight rates, some customers shipped ahead of schedule, which further exacerbated the tension of shipping space and promoted the rise of freight rates.

The shipping company ignored the contract
The owner and freight forwarder were furious

According to foreign media reports, in recent weeks, spot freight rates have soared and shipping companies have ignored contracts, triggering anger among Nordic shippers and freight forwarders as they struggle to digest the rapidly rising spot rates.

Gains have increased in recent weeks, with Drewry's WCI Shanghai-Rotterdam route up as much as 20% to close at $4,999 per 40ft.

However, according to the source, the actual purchase price is much higher, "the actual price of the spot is between $6,000-$7,500, and even the carriers say they will reach $10,000." 

Tight vessel supply and high trade demand, as well as exacerbated container shortages in Asia's major export hubs, are currently having a significant impact on secondary trade lanes. At the same time, carriers prefer to carry high-rate spot cargo rather than contract cargo, which angers many customers.

A European import manager said the recent surge in freight rates could force it to suspend shipments after the current bookings are completed.

"Carriers are now primarily concerned with profits," he explained. We are processing the shipments currently on the production line and will suspend shipments as soon as these shipments have been completed, and we have notified our suppliers and partners in advance. ”

A freight forwarder also expressed his displeasure, saying bluntly: "It's just an excuse, just like the coronavirus pandemic is being used as a reason to raise freight rates." He questioned: "Is it really more expensive to ship a container now than at any other time?" Or are shipping companies just taking advantage of market conditions? ”

The freight forwarder further analyzed: "It's like a tulip mania, it's a bubble. Once this bubble bursts, there will be the usual cyclical rate fluctuations, i.e., the collapse of freight rates and subsequent recovery. This is a natural cycle in the industry, and shipping companies should understand that they can't rely on raising freight rates forever to maintain profits. ”

Affected by the rise in transportation prices, some freight forwarding companies and small and medium-sized foreign trade enterprises may face losses.

At present, the price of export shipping is rising day by day. Because of the shortage of shipping space and containers, the space booked by freight forwarding companies with shipping companies is often cancelled, which increases the workload of freight forwarders; Foreign trade enterprises may face a backlog of goods and cannot deliver on time, increasing their default risk.

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