Shippers operating on the eastbound trans-Pacific lane are vying with one another to secure premium booking guarantees, lending support to an already escalated spot market.
Demand for ex-Asian shipments continues to mount, putting pressure on already constrained vessel capacity networks, lending support to both freight all kinds (FAK) and premium charges.
“Premiums are not going down,” one shipper said. “If you don’t have the ability to ship pursuant to a contract, and get the carriers to honor that, you have to pay for a premium.”
And many carriers have slated increases on both an FAK and premium basis in June and July, resulting in low sentiment from shippers and NVO’s that rates will ease anytime soon.
During the week to June 4, S&P Global Platts heard premium service fees at $7,000/forty-foot equivalent unit (FEU) to $8,000/FEU, excluding FAK charges, on the North Asia to US Pacific Coast route.
And cargo bound for the US Atlantic Coast is significantly higher, with nearly all premiums bookings coming to over $15,000/FEU, market sources said.
“Premium services to USEC are in the five digits now, almost high enough to begin with a ‘two’,” the same shipper added.
Some ocean carriers are now handling more premium cargo than FAK or fixed rate containers, sources said.
“Premium rates continue to take a life of their own and keep growing,” said one US freight forwarder. “FAK is immaterial and does not matter right now.”
FAK rates take backseat in Southeast Asian Market
Sources in Southeast Asia painted a similar picture as premiums continue to rule the market and FAKs are out of action.
The premiums have touched $15,000/FEU for East Coast North America and one may try getting a booking at $13,000/FEU, depending on the negotiations, but anything below that is difficult to work, according to a freight forwarder based in South China.
For Southeast Asia to West Coast North America, rates were hovering at $8,000-$10,000 per FEU, sources said.
Even though the premiums are more than double of the FAK rates, they fail to promise a timely booking and some shippers had to wait for four weeks to get a confirmed space even after they made a premium booking.
“We have been witnessing shortages for a long time, but June looks like the worst month of the year, in terms of container space,” a freight forwarder based in South China said.
Asia Westbound sticks to FAK increases
Demand from the US and Europe continues to grow as the COVID infections in these countries have decreased and the trade is getting closer to pre-COVID levels, the source added.
Asia to Europe trade continued to be done largely on a FAK basis over the course of the week, with carriers once again opting to focus on stronger base rates rather than additional premiums on rates which are still at all-time highs.
Alongside this lack of premium services to the North Continent, there is still firm demand, resulting in significant cargo volumes being rolled and this is expected to continue well towards the end of the year, with firm demand stretching through July and August already at this stage.