Shipper Frustration Mounts as Demand Spikes, Capacity Tightens, and Rates Soar

Shippers and carriers have been caught off guard by a sudden surge in demand on Asian trades.

Despite the soaring demand, capacity has remained static, resulting in space constraints and rolled cargos, creating significant backlogs that are expected to take weeks to clear.

The Red Sea diversions are also adding to the woes as transshipment hubs across Asia and the Mediterranean struggle to keep up with the massive spike in container traffic.  With delays of up to a week reported at Hong Kong, Port Klang, Jebel Ali, Colombo, Tanger Med, Barcelona, and Algeciras, carriers have been forced to “slide” or cancel sailings from origin, often with little or notice, further reducing available capacity.  To help recover schedules, carriers are changing or omitting port calls enroute, creating widespread disruption across the network.

Compounding the situation is a critical shortage of empty containers – brought on by too many empty sailings over the May Day holiday which delayed the repositioning of equipment back to Asia – and significant volatility in container leasing market, triggering significant rate hikes ‘almost every 48 hours.’   According to a recent article by AJOT, carriers and leasing companies placed orders for more than 1m TEU in April, with factories sold out through the end of July and into September.  Furthermore, “some container sellers are holding up the inventory in anticipation of price hikes in May.”  Meanwhile, container depots in the U.S. and Europe are reporting higher utilization rates and, along with it, higher usage and administrative fees, including storage and demurrage fees.

Meanwhile, spot rates are shooting up rapidly, with rates to Southern California and Europe seeing the largest gains.  In many instances, quotes are being withdrawn only to be replaced with higher rates.  And with carriers anticipating continued strong demand over the coming weeks, they have already announced another round of General Rate Increases (GRI) for mid-May.  We are also hearing they are eyeing Peak Season (PSS) and Bunker Adjustment (BAF) surcharges for early June.