Freight Forwarding Pricing Turned Upside Down
Just a few short weeks after reporting on the significant ongoing price rises in the cost of international container shipping and predicting that there was yet more to come, industry sources are now saying that the situation has been turned upside down, with many companies now cutting prices in competition with each other.
“Things have been turned on their heads in recent days and this is having a significant knock on effect on rates. Some of the shipping lines didn’t raise rates recently when many of the others did and now many carriers are price cutting to remain competitive and are aggressively targeting new customers,” Rob Shelley of Suffolk-based freight forwarder Maritime Cargo Services told Tyres & Accessories.
This new scenario seems to have been kick started by the Chinese New Year holidays, which began on 14 February this year. With manufacturing in the Far East easing off for a period this is said to have freed up shipping capacity and forced rates down. The capacity crisis that has afflicted, for example, the key Asia-Europe trade routes over the last six months is said to be coming to an end with this easing of volumes and the fact that carriers have started to introduce both new build and previously mothballed capacity. According to Shelly, “recent tonnage increases on the global market represent a year on year overall fleet increase of 9 per cent.”
Freighting reliability and costs fluctuate in an uncertain market
One of the world’s largest shipping lines, Mitsui OSK, has for example just announced dramatically increased profitability and added that it intends to increase its global fleet by a further 350 ships over the next few years. Another of the major shipping lines, APL, has just announced that its container shipping volumes increased 37 per cent in the last month compared to the same period last year due to what it described as “the biggest jump in container volumes in at least six years” as US and European retailers restocked. To meet demand, it is increasing capacity by 7 per cent this year.
There is some concern, however, that the industry could have entered a cycle in which rates and capacity availability veer from one extreme to the other. “If rates start dropping too quickly, carriers could start removing capacity again and we could go back to the capacity shortage situation we were in before. All of which could have a destabilising effect on shipping lines threatening their long term financial recovery,” Shelley explained.
Shipping reliability deteriorated in the fourth quarter of last year with just 53 per cent of the thousands of ships tracked arriving as scheduled or the day before. This compared with an average of 60 per cent for the previous three quarters and a record high of 69 per cent in the second quarter. It seems that shippers were hit with a double blow of having to pay higher rates and getting a worse standard of service.
|Far East Base Port 40’HC Freight Rates (inclusive of surcharges) July ’09-April ’10