Export Rate Increases

Export Rate Increases

It is currently widely published in the shipping press that effectively all the main shipping lines are currently imposing punitive increases with a minimal notice period to their customers. The areas which are facing the most significant surcharges are currently the Middle East, Far East and the Indian Subcontinent.

An article from an independent, analytical entity this week stated spot prices to Chinese base ports had increased 45% just this week. It seems that further increases will be imposed from the 1st of April, initial indications are up to $1000 per container.

During the last few years, the majority of our clients have seen stable freight rates and where possible we have reduced their rates as savings / freight rate reductions have been negotiated by our export team here at Staples. However, since the demise of Hanjin Shipping back in September 2016, a significant amount of shipping capacity has been taken out of the global market. To briefly summarise the facts, Hanjin where the world’s 8th largest carrier with a fleet of 141 vessels with 400,000 containers stranded globally once the line were declared bankrupt.

Moreover, the lack of vessel space has further been compounded by the cancellation of sailings by the shipping lines following Chinese New Year. Furthermore, domestic policies in China have stimulated demand and the requirement for raw materials (such as chemicals, wood, paper and recyclables) and there has been a significant demand for consumer goods. The ‘World Container Index’ assessed by Drewry, which takes into account rates on 11 routes from Europe, US and China, showed it was 110% higher than this time last year where the container shipping market was facing low volumes and space was thus readily available.

In addition to the above, the main shipping lines are also experiencing an extremely high level of demand from the North West Continent where rates are significantly higher than those out of the UK. Thus carriers in an attempt to recover vast losses from recent years are thus aligning rates from UK in line with their other European port calls. Whilst we can say the shipping lines are ‘profiteering’, it is evident that if rates do not increase then other carriers will meet the same fate as Hanjin. As an example the Financial Times 8th February published an article on Maersk Line who in 2016 posted a loss of US$1.9 billion.

To conclude as an ethical business, we have over the last 2 – 3 months absorbed some of the increases which have $50 - $100 per container as we strive to offer consistent, stable pricing. However, the increases we are faced with in March and April are so punitive that we have to recover these from our clients. Please be assured we are doing everything we can to obtain part / full mitigation these GRIs but at this stage the shipping lines will not deal. It may be that as the months progress and the demand subsides, the current surcharges will dissipate and your account manager / trade desk will inform you within 24 hours of the reduction but only time will tell.

As the director of Staples International Shipping Ltd, I can only thank you for your support and continued business during this extremely difficult time in our industry.