Shipping lines announce hefty trans-Pacific surcharges

Large container ship arriving in port.

Shipping companies operating on trans-Pacific eastbound trade lanes have announced rate increases for August at unprecedented increments, often using new terminology to describe the surcharges affecting North American importers.

German shipping line Hapag-Lloyd on July 16 announced a Value Added Surcharge (VAD) of $5,000/forty-foot equivalent unit (FEU) or $4,000/twenty-foot equivalent unit (TEU) effective August 15 for spot cargo shipments from China to the US and Canada.

“This surcharge will not affect any mid-term or long-term contracts and is meant to replace some other ad hoc surcharges” such as the Shipment Guarantee Fee, the company said, adding that the increase was “due the continuation of extraordinary demand from China and the resulting operational challenges along the transport chain.”

That surcharge alone exceeds the cost of container freight from North Asia to East Coast North America since the Platts assessment was launched in July 2017 through to December 2020. The assessment, Platts Container Rate (PCR) 5, was $8,600/FEU July 16.

The $5,000/FEU surcharges is also greater than the total freight cost from North Asia to West Coast North America from at least July 2017 to just six weeks ago on June 1. That assessment, PCR13 was at $7,400/FEU July 16.

Bargaining power

All nominated surcharge and rate increases are subject to negotiation with shippers, but demand for imports in North America is so strong — and available space on ships departing Asia is so limited — that bargaining power is firmly lopsided toward shipowners, market sources said.

“There’s no predicting what kind of numbers we’re going to get. Numbers are bubbling to the top,” a Singapore-based logistics provider said. “There are no good deals. We’ve got carriers who we have contracts with who refuse to honor” the minimum quantity commitments.

Similar surcharge increases

Other shipping firms made similar surcharge announcements this week. Trans-Pacific customers of Israel-based ZIM Integrated Shipping Services received a notice this week that a Congestion Surcharge (CGS) would take effect from Aug. 6, lifting rates from East Asia to the US by $5,000 on both an FEU and TEU basis, according to shipping consultant Jon Monroe.

Switzerland-based MSC said it would impose a CGS of $1,000/FEU for East Asia to US/Canada from Sept. 1. This is in addition to Peak Season Surcharges (PSS) for the route imposed by MSC as early as March and that increased by $2,500/FEU in June. The typical peak season runs from August-November as retailers restock ahead of end-of-year holidays, but that restocking was underway much earlier this year amid severe supply chain congestion.

Singapore-based ONE announced PSS for East Asia excluding China to North America of $2,000/FEU effective Aug. 1. The PSS from China to North America will be $1,000/FEU, the company said.

Westbound surcharges

Trans-Atlantic westbound trade lanes will also be subject to new PSS in August amid port congestion and as carrying capacity is diverted to trans-Pacific services.

ONE has a PSS of $3,000/FEU set to take effect from Aug. 4 for Europe to US East Coast shipments, while France’s CMA CGM announced a PSS of $1,250/FEU for North Europe to the US East Coast and US Gulf Coast effective Aug. 4.

Platts Container Rate 9 — North Europe to East Coast North America — was assessed at $6,200/FEU July 16.

Source: Platts