Recently, many shipping lines have successively announced to raise the FAK (Freight of All Kinds) rates of some routes. Among the news, Maersk said that from July 31, 2023, the FAK rate from major Asian ports to Mediterranean ports will be raised, with 20ft DC container raised to USD1,850-2,750, 40ft container (DC&HC) raised to USD 2,300-3,600 US dollars, and will be valid until further notice, but will not exceed December 31.
What’s more, Asia-North Europe ocean carriers will enforce sizeable GRIs (general rate increases) this week, but there are already signs that only a few will be sustained. So how will shipping companies sustain freight rates in the situation? Let’s see analyses from The Loadstar and India Shipping News.
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Shipping Lines Believe Uptick to Be Continued
According to India Shipping News, Container Trade Statistics show that total imports in Europe increased by 4% and Asia-Europe trade by 8% despite global demand being broadly flat from March to May. From a macro perspective, this suggests that activity in Europe and Asia is holding up better than reported.
The shipping lines believe this trend will continue. They even announced increased rates for their Asia-Europe services in the second half of the year. Moreover, they are actively supporting rates by restricting capacity to North America.
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Signs Show Only a Few Carries Will Sustain Raises
In accordance with the FAK rates, sizeable GRIs by Asia-North Europe ocean carriers will come into force this week, according to a report on July 28 from The Loadstar. However, a straw poll from The Loadstar’s shipper and forwarder contacts shows that only 50% of the major carriers are likely to achieve their August 1 FAK rate increases. But then, the same carriers are offering the GRIs discounts from the second half of the month.
Forwarding contacts also doubt whether they can achieve the full “increase” quantum. Some shippers even decide to postpone loading dates, in gambling of fallen back rates.
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How Shipping Lines Sustain Rates
For the past nine months, shipping rates have been on a downward trend. Meanwhile, more than 1.2m teu (twenty-foot equivalent unit) of newly built tonnage will be stemmed for delivery before the end of the year, including several 24,000 teu behemoths to be deployed on the Asia-North Europe route.
However, the additional capacity should not lead to an automatic assumption that rates will continue to fall through the end of the year. An uptick in demand, especially in Europe and Asia, may be a chance for these lines to slide further. Plus, shipping lines, particularly Asia-North Europe carriers, will need to be judicious in their capacity. They can maintain rates by collaborating to manage capacity to prevent the surging capacity to result in lower rates and overcapacity. After all, shipping lines learned during the pandemic to cooperate and collude with each other.
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References: 1. Senghor Logistics 2. India Shipping News 3. The Loadstar
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