The largest importers from Asia have had to accept a doubling of their long-term rates, while those who delayed negotiations in the hope of more favourable conditions have instead been hit with an additional 10% increase on top!
Because their supply chains are massive and often irretrievably linked to specific delivery dates and just-in-time considerations the supermarkets, large retailers and manufacturers negotiate service contracts directly with the shipping lines, so that they can be certain (most of the time) that their cargo will always make their designated sailings.
Every year each side vies for a negotiation advantage, with the shippers usually getting the high ground; using their high volumes and the lines competing desire for market share to drive down rates.
In 2016, for the first time since the financial crash, demand for shipping space was so great, that even the biggest shippers found their cargo left on the quayside as the lines carried higher paying freight.
With capacity under control and demand still at unprecedented levels the lines went into this years contract negotiations on the high ground and with the belief that they have a unique opportunity to recover their balance sheets.
According to new data from market intelligence firm Veneta the long-term container rates they have negotiated in the past three months are more than double the average levels for last year and 10% higher in Q2 than in Q1. “Many shippers may be kicking themselves.”
Higher rates are the biggest short-term challenge facing forwarders and shippers, as strong demand and carrier discipline are likely to mean ocean freight prices remaining high through 2017.
While MIQ Logistics recognise the likelihood of higher rate levels persisting through 2017, we will seek to offset with flexibility in the routing and carrier options we select.
Provisional trade lane data indicates that world box traffic surged by 10% year-on-year in the 1st quarter of 2017, with average volume growth for the six leading carriers also 10% over the same period. Which means there is currently no downward pressure on rates, with none anticipated in the short to medium term.