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Shippers artificially inflate freight rates through voluntary increases

  • A carrier revealed that if it offered US$10,000 per container to the US East Coast, companies would offer $12,000 to $15,000 instead
  • Drewry’s composite World Container index increased 1.7% or $170 to $9,987.27 per 40-foot container last week

Shippers and freight forwarders desperate to secure any available vessel slots are artificially supporting freight rates on the trans-Pacific eastbound trade by voluntarily increasing rates, according to an S&P Global Platts report.

The commodities information and price benchmark provider said a carrier source revealed that if it offered US$10,000 per container to the US East Coast, “companies will come and offer $12,000 to $15,000 instead.”

“Every time I’m meeting with an import customer, the one phrase I keep hearing is ‘what’s it going to take’,” the source said.

And many carriers were heard accepting almost exclusively premium bookings during the week, as all-inclusive rates continued their northerly trek, noted Platts.

“At the end of the day, the rates published do not matter,” a US-based co-loader source told Platts. “Every vessel, every sailing is its own pricing scheme.”

This comes as Drewry’s composite World Container index (WCI) increased 1.7% or $170 to $9,987.27 per 40-foot container last week.

The maritime and shipping research and consulting services in its September 2 assessment said the WCI also remains 344% higher than a year ago and is the 20th consecutive week of increases.

The WCI is a composite of 40-foot ocean container freight rates on eight major routes to/from the US, Europe and Asia.

Drewry said freight rates on Shanghai to New York surged 6% or $899 to reach $15,035 per 40-foot container. Spot rates from Los Angeles to Shanghai gained $35 to $1,433 per FEU.

The average composite index of the WCI year-to-date is $6,598 per 40-foot container, which is $4,304 higher than the five-year average of $2,294 per 40-foot container.

Drewry said it expects rates to increase further in the coming week.

The unremitting upward direction of freight rates on the trans-Pacific trade is being fanned by surges in demand for cargo space, uncertainties over the easing of capacity constraints, equipment shortages, port congestions, and the arrival of the peak holiday season.

Photo by Rinson Chory on Unsplash

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