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EU shippers delaying ex-Asia cargoes to avoid record container rates    14/01/2021
Cargo owners are facing an array of challenges in transporting their goods out of China before the Lunar New Year holidays.

Some European shippers are rejecting the higher costs it would take to load their Asia imports, spurring some factories to lengthen their Chinese New Year holidays while containers stack up at ports, JOC.com has learned.

As container spot rates on Asia-Europe set yet another record this week, the race to ship cargo ahead of the Lunar New Year on Feb. 12 in a severely space-constrained environment is leading to fierce competition among forwarders.

“Some factories producing relatively low-value products intend to start their holidays around Jan. 20 because their customers are unwilling to pay the high freight cost, and as a result cannot get the space in January,” said a Germany-based forwarder who did not want to be identified.

China-North Europe spot rates rose 9 percent this week to $4,452 per TEU, according to the Shanghai Containerized Freight Index (SCFI). That is over three times the rate during the first week of 2020, and almost four times higher than the spot rate at the beginning of October.

Average China-Mediterranean rates remained flat at $4,298 per TEU, but that was still an increase of 264 percent year over year. The weekly rate movements of east-west trades are tracked at the JOC Shipping & Logistics Pricing Hub.

The SCFI records the average rate levels on Asia-Europe, but the reality being faced by shippers requiring space above their contracted volume is very different. The logistics manager for a large south Europe shipper told JOC.com that a forwarder last week offered him China-North Europe rates of between $13,000 and $16,000 per FEU, valid for a week.

The inability to secure space on ships, or an unwillingness to pay premium rates, is creating backlogs of export containers at factories or in off-dock yards in the Pearl River Delta, and has prompted ports such as Nansha to offer shippers of international cargo 21-day free storage.

“Some factories are backlogged not only with orders, but also with loaded containers that need to be removed from their premises,” said John Painter, president and CEO at Guangzhou Port America, the marketing and sales arm of the Guangzhou Ports Group that operates Nansha. “We have been contacted by several very large BCOs [beneficial cargo owners] that have thousands of containers idle.”

About 30 percent of the backlog that has built up at the ports will be carried over to after Chinese New Year, Jon Monroe, a consultant to non-vessel-operating common carriers (NVOs), wrote in a market update this week. 

“All carriers in all ports are short of equipment,” Monroe said. “In some ports like Haiphong in Vietnam and Fuzhou in China, there is absolutely no equipment available.”

On the trades out of Europe, some carriers have imposed additional equipment imbalance surcharges for exports, such as Hapag-Lloyd charging $200 per FEU, and CMA CGM charging $200 per TEU. Hapag-Lloyd also announced Friday it was suspending empty container pickups in Hamburg until Feb. 12.

“Due to ongoing unforeseeable operational challenges, we still face an extremely tight equipment situation, affecting our container depots in Germany, Austria, Switzerland, Hungary, Czech Republic, and Slovakia,” the carrier said in an advisory. “We expect the situation to remain extremely tight over the next few weeks.”

Barge operators suspend services

Further complicating the movement of import and export containers, particularly those shipped through Hong Kong, is the suspension of much of the barge services that connect manufacturing centers along the Pearl River to the hub ports.

Barge transport is a vital link in the Pearl River Delta container transport network, offering a service 20 percent per container cheaper than road. However, barge crews need to be quarantined before they will be allowed to set off on holiday over Chinese New Year, so the barge operators have announced radically reduced services from inland ports in South China to the ports of Shenzhen, Nansha, and Hong Kong until Feb. 22.

Michael Amri, global head of sea freight and FCL at Hellmann Worldwide Logistics, said some carriers were still providing feeder services, although on very limited schedules. “On the whole, we are also affected to a certain extent, but not as large as expected,” he told JOC.com.

Ocean Network Express (ONE) has already stopped taking bookings for inbound cargo in some South China ports, while OOCL will suspend bookings in the region from Jan. 11 to Feb. 23. CMA CGM announced in early December that it had suspended bookings for cargo due to arrive at ports in South China in the first few weeks of 2021.

Cutting back on barge services has created fast-rising demand for trucking, which is being accompanied by rising rates. “The trucking cost will increase two weeks before the start of Chinese New Year on Feb. 12, although this has been the pattern over the last few years,” the head of a Hong Kong-headquartered freight forwarder who asked not to be identified told JOC.com.

“Capacity on the river barges and equipment scarcity in smaller cities has reached a critical point. Improvement is unlikely any time soon,” logistics provider Mondiale told customers in a recent advisory. “The situation remains fluid, however, we can expect further space and equipment pressure, which may result in further cartage costs to Shekou or Yantian as truck drivers begin departing for home cities.”

 



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