Crazy suspension of flights! Multiple routes have increased their fares Will American shipping companies strike back with heavy punches?

Flights suspended, fares increased, will American shipping retaliate?

The global container shipping market is gradually recovering. While other shipping companies are still hesitant, American shipping companies are directly launching a “heavy attack”, crazily suspending services and raising the comprehensive rate and surcharges (GRI). American shipping rates are rising as the tide rises.

Multiple shipping routes have seen price increases

According to the latest data from the Shanghai Shipping Exchange, the Shanghai export container shipping price composite index increased by 76.72 points in this period, returning to the 1,000-point mark and reaching 1,033.65 points. Among them, in the North American route, the basic market shipping rate (including shipping and surcharges) of the US West Coast is $1,688/FEU, an increase of 29.1%, breaking the record for the largest weekly increase in two years. The basic market shipping rate (including shipping and surcharges) of the US East Coast increased by 19.5% to $2,565/FEU.

Source: Shanghai Shipping Exchange

In addition to the North American route, the Persian Gulf route and the South American route also saw double-digit growth compared to the previous period. Among them, the Persian Gulf route increased by 11.8% compared to the previous period, with a shipping rate of $1,221/TEU; the South American route increased by 10.3% compared to the previous period, with a shipping rate of $2,005/TEU.

The shipping rates of the European route have been stable for a period of time, with the basic port shipping rate of Europe at $871/TEU, a slight decrease of 0.7% from the previous period, and the shipping rate of the Mediterranean route at $1,618/TEU, a slight decrease of 0.2% from the previous period.

The reason behind the shipping companies’ adjustment of shipping rates

The reason why the shipping rates of the European route are so stable is mainly because many shipping companies have signed long-term contracts with major customers in January. Considering that the new environmental protection regulations of IMO will be implemented in the new year, shipping companies generally do not want to sign long-term contracts below spot prices. Therefore, some shipping companies have even offered long-term contract prices that are twice as high as spot prices. At present, the shipping rates of the European route have fallen to a low point and cannot go down further. However, they will not suddenly rise, so most of the long-term contracts on the European route are still a “tug of war” between shipping companies and customers.

The reason why American shipping companies suddenly raised their shipping prices collectively is actually to prepare for the signing of long-term contracts in June. Many American long-term contracts will expire in April, and a new round of long-term contract price negotiations will begin after the expiration. The long-term contract price is based on the current spot price of the route. Therefore, if shipping companies want to have an advantage in the negotiation of long-term contract prices, they must stabilize the spot price as much as possible before June. Therefore, the shipping company’s new price increase plan must be officially implemented in April and May. As of April 1st, Ocean Alliance has already raised GRI for the Far East and the Indian Subcontinent to the United States and Canada, and Hapag-Lloyd announced that the freight rates for Asia to the United States will increase $800 for every 20-foot container and an astonishing $1000 for every 40-foot container from May 1st.

Massive suspension of shipping to stabilize shipping prices

Behind the stable shipping prices of shipping companies, there is also a pusher, which is to suspend shipping and control the deployment of shipping routes. Although freight rates for American routes have risen sharply in the past two weeks, blank sailing plans are still being implemented.

Image Source: Drewry

In major long-distance trade between the East and the West, among a total of 675 scheduled flights between the 16th week (April 17th to April 23rd) and the 20th week (May 15th to May 21st), 52 flights were announced to be canceled. During this period, 58% of the blank sailings will occur in the eastbound trans-Pacific, and 42% will occur in Asia-Northern Europe and the Mediterranean. In February, due to the continuous downturn in the global macro economy, coupled with the impact of the Asian New Year, the load factor of container ships dropped significantly. This phenomenon is more pronounced, especially on the Pan-Pacific Eastbound and Asia-Northern Europe and Mediterranean trade routes. Although shipping companies have controlled the deployment of shipping capacity in advance and arranged for blank sailings, the shipping consultancy Drewry also stated that with the continuous decline in new ship capacity, carriers will face greater capacity challenges.

Will the upcoming market cargo volume be able to support the continued GRI increase of shipping companies? Let’s wait and see!

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