Space issues causing trouble for shipping routes

Unusually tight capacity for the time of year is leading to rising rates, booking restrictions and backlogs for European exporters needing to ship from Europe to the Middle East and Asia. This is in part attributed to exceptionally high levels of post Chinese New Year shipping cancellations, which have meant price increases for Europe to Asia container rates. At this point, all bookings are being honoured, even though there seems to be a perception that this isn’t the case. Hapag-Lloyd have introduced a US$200 peak season surcharge (PSS) for containers from Europe North Continent to East Asia, effective for sailings as of 15 March and valid until further notice. Many forwarders are recommending at least 3 weeks advanced notice of bookings. The bankruptcy of the Hanjin shipping line last year has had a knock on effect from when it ceased to accept new cargo. Hanjin was the 7th largest container shipper in the world and the news has meant that their cargo has had to be distributed amongst an already nearly full to capacity fleet. Other shipping lines eventually took over their cargo, but at a price, with vessels already operating at high capacity. Patrik Berglund, CEO of containerised ocean freight data specialist Xeneta said that data indicates that the current short-term rates for 40’ containers from North Europe to Asia averaged US$969. This level of pricing started in November and December ahead of Chinese New Year and had stayed high – and slightly continued to move upwards, Berglund said. He said it was difficult to give a precise and short answer to the reasons for the current unexpected capacity crunch and high prices, but suggested it was due to a combination of carriers extracting more capacity than predicted demand and re-routing of capacity onto other corridors. Xeneta had indicated in the lead-up to Chinese New Year that container lines operating on Asia-Europe trades were taking stronger measures than usual to maintain the recent recovery in ocean freight prices by making major cuts to capacity in the weeks after Lunar New Year. Since towards the end of 2016, the market has experienced a strong and sustained recovery, with container rates around 125% higher than they were around this time last year for Asia-Europe routes, Xeneta said. Xeneta’s sources had indicated that carriers were “taking stronger measures to deal with overcapacity to make sure the market stays up”, indicating that lines were attempting to prop up prices by reducing westbound sailings by 33% in the week immediately after Lunar new year and by around 43% from full capacity the following week. Xeneta noted at the time that this behaviour from carriers may mark a distinct difference compared with this period normally in previous years, when rates traditionally slide in the aftermath of Chinese New Year.