Container Premiums: Ningbo port issues create risk for even higher surcharges

Premium container rates for shipments from North Asia to North America were mostly stable this week for services departing in late August, but there was a risk of further increases as participants measured the impact of two terminals halting operations at China’s Ningbo port, the country’s second-busiest container hub.

Rates, including premium service fees for shipments from China to US East Coast ports in the last week of August, were quoted this week in the $19,000-$20,000/FEU range. Cargoes departing Shanghai or Qingdao Aug. 20-27 to Los Angeles/Long Beach were being charged $15,300-$17,000/FEU, a freight forwarder, based in Asia, said.

A shipper of goods from China to New York that exclusively books through a freight forwarder said some discounts were available if the departure date is flexible within the late August or early September window.

“We were told by our supplier in China that a 40-foot container will cost $20,000 to move to New York, but we can usually find a better rate at around the $17,500/FEU level,” the shipper said.

Inland-point intermodal shipments remained significantly more expensive than port-to-port shipments. Rates with premium surcharges for late-August shipments from China to Chicago or Toronto were quoted in the $23,000-$25,000/FEU range.

“I think the carriers are offering up space to smaller China-based forwarders on a pre-paid basis,” a US-based freight forwarder said. “So there seems to be a lot of secondary market opportunity, but not any savings.”

Port congestion on both sides of the trans-Pacific trade lanes threatened to get much worse after two terminals at China’s second busiest container port, Ningbo Zhoushan, suspended operations this week after a port worker tested positive for coronavirus.

A similar outbreak at Shenzhen’s Yantian port in May curtailed operations for a month, causing diversions of export cargoes to other Chinese ports and fueling a further escalation of premium service fees expected by shipping lines for priority loading.

Demand builds in Vietnam; Calls from India ignored

Premium rates for the Southeast Asia-to-East Coast North America route were heard in the $18,000-25,000/FEU range this week. To West Coast North America, prices ranged from $16,000/FEU to $20,000/FEU.

But rates for premium services are likely to increase next week as shippers compete to book space on ships headed to the US and Europe.

“Everybody is trying to get hold of a container and sail off their goods in time for the Christmas season in the US,” a source based in Hong Kong said. “If we miss this window, we may end up missing the pre-Christmas sale in the US, as it now takes a container 50-75 days to reach the US East Coast versus 20-24 days earlier.”

Premium rates for shipments from Southeast Asia could also rise once pandemic-related lockdown restrictions in Vietnam are lifted and factories scale up production to catch up with orders, sources said.

“COVID cases are still rampant in South Vietnam and Central Vietnam. Production plants are closed and only 30-40% of factories are still working in South Vietnam,” the source based in Hong Kong said. “We are hearing talks that the lockdown will be extended until the end of the month.”

Shippers from South Asia are worried that their cargoes will be further neglected by shipping lines as more carrying capacity is diverted to China-to-North America trade lanes amid the Ningbo port issues, an India-based freight forwarder said.

“I have been trying to get a shipment to Australia for a month now,” the freight forwarder said. “Initially, the carrier gave me a premium rate of $4,500/TEU but no booking. They agreed to give me a container at $5,500 on Wednesday, but I have been calling them for two days now. They are ignoring my calls.”

Falling rates on the horizon

For Asia-to-Europe shipments, premium service fees were not imposed by carriers for all but the most prompt of cargo movements.

A shipper was heard to have shipped a prompt-loading cargo of goods from Asia to Europe at $22,000/FEU, but most shippers were quoted rates in the $15,000-$18,000/FEU range on a FAK basis. Platts Container Rate 1 — North Asia to North Continent — was assessed at $17,000/FEU, unchanged on the week.

But further near-term upside is expected. The terminal shutdowns at Ningbo appear likely because of further logistical constraints for European importers as the market continues into its traditional peak season.

But many European market participants expect rates to finally begin falling in October ahead of the typical Christmas lull, as this would give carriers the opportunity to rebalance empty containers and pave the way for further downside into the new year.
Source: Platts