Cargo rollovers cause chaos on Transpacific
Aug 29 2018


US importers are paying premiums to find open slots and avoid cargo rollovers on transpacific services from Asia due to surging demand and a lack of capacity, according to leading forwarders.

“There are increasing number of container rollovers on the transpacific,” Paul Tsui, managing director of Hong Kong-based forwarding and logistics operator Janel Group, told Lloyd’s Loading List earlier today.

US importers are paying premiums to find open slots and avoid cargo rollovers on transpacific services from Asia due to surging demand and a lack of capacity, according to leading forwarders.

“There are increasing number of container rollovers on the transpacific,” Paul Tsui, managing director of Hong Kong-based forwarding and logistics operator Janel Group, told Lloyd’s Loading List earlier today.

“Most of the BCOs (Beneficial Cargo Owners) are having difficulty getting sufficient space from carriers and some customers are willing to pay premiums for the space to resolve the issue. We are talking about US$ 500-600 per container as a premium.

“Most people have already given rolling advance bookings to carriers of up to four weeks, but it does not really help at all.”

After carriers culled capacity on the trade earlier this year, the transpacific box trade quickly become a sellers’ market with spot rates edging up throughout early summer and General Rate Increases gaining traction. Drewry’s composite World Container Index increased 4% last week to $1,759.86 per 40ft container, boosted by more transpacific rate gains.

Spot rates on Shanghai-New York surged $227 to $3,429 per feu, up 7% compared to a week earlier, while rates from Shanghai to Los Angeles were up $45 to $2,196 per feu.

Compared to a year earlier, spot rates on Shanghai-Los Angeles and Shanghai-New York services last week were up 33% and 29%, respectively.

Further freight rate rises are likely in the coming weeks, according to Flexport. The US-based forwarder reported that GRIs introduced by lines on Asia—US East Coast services on 15 August had mostly stuck. Additional GRIs for September 1 have now been announced.

Flexport also confirmed eastbound headhaul services from Asia to both the East and West Coasts were now fully booked through early September.

Sriram Vaithiyanathan, Panalpina’s ocean freight trade lane manager for Asia-Pacific transpacific eastbound services to the US and Canada, said demand for transpacific slots was up “20-25%” compared to a year earlier, while carriers had made significant cuts to capacity on North American West Coast service loops.

“July and August have seen very high demand in the transpacific from all countries in Asia in comparison to a year ago,” he said.

“Due to excess demand in the market, rollovers are a regular phenomenon and we understand that carriers are building roll pools cascading multiple weeks.

“On certain strings, even on shipments pre-booked three weeks prior, we have delays on booking confirmations from carriers, or they assign alternative vessels running two weeks later than the requested sailing dates.

“This is going to be the scenario until we hit lean season.”

Vaithiyanathan said the Sino-US trade war, which has already seen tariffs introduced on thousands of Chinese imports with more due to enter force later this year, had added to the cargo surge by encouraging some US importers to ship cargo early.

“We have certain customers who are bookings 25-30% higher volumes than projected,” he added. “They are front-loading cargo to beat the tariff implementation dates.

“Other customers are moving sourcing from China to other countries also now.

“We are noticing new suppliers coming in.”

With no sign of transpacific demand slackening, Maersk has added additional capacity on the route to take advantage of healthy spot rates. Other carriers are likely to follow, according to Alphaliner.

“The 3,421 teu MATAR N has been sent on a trip covering Yantian, Hong Kong, Busan, Houston, Miami, Charleston, Savannah, Newark starting on 14 August,” said the analyst in its latest weekly report. “This will be followed by the 5,078 teu DOLPHIN II on 22 August to cover Yantian, Hong Kong, Ningbo, Shanghai, Los Angeles, Seattle, Vancouver.

“More extra loaders are expected to be announced in the coming weeks by various carriers, encouraged by both the higher freight rates as well as to ensure service recovery after recent weather delays at Chinese ports disrupted carriers’ schedules.”

 

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