Thursday, March 16, 2017

New Export Demand and Reduced Container Capacity Causes Freight Forwarding Bodies to Speak Out

Problems and Extra Costs for Deep Sea Box Shippers as TEU Shortage Bites
Shipping News Feature
EUROPE – ASIA – The world of deep sea container shipping is in confusion at the moment precipitated by the slump in trade in recent times following a prolonged burst of expansion primarily driven by the huge volume of cargo in 20 and 40 foot boxes coming from Asia into Europe and North America. This activity caused the shipping lines to invest in the massive new vessels we now see all over the world. Previously a 5,000 TEU ship was considered large, now we see vessels up to four times bigger serving every major ocean trade lane, but global freight forwarding associations are not happy.

In the past decade we have recounted how volumes and capacities have risen then fallen resulting in new tactics by the lines, firstly universal slow steaming which delays all cargo transits but saves fuel and emissions and means a significant drop in available capacity ‘on the water’. Lately cooperation between lines has become de rigeur and new alliances divert individual bookings onto whichever vessel is operated by one of the partners to the agreement.

Now new problems are arising, the cost of shipping containers from Europe to Asia has risen sharply, previously the scramble to relocate boxes back East has meant cheap costs for shippers with low value cargoes, rubbish for recycling and scrap commodities being prime examples. The latest situation has spurred two of the world’s foremost authoritative bodies to express their deep concerns about current capacity levels and service uncertainties.

Capacity for maritime shipments to Asia has decreased dramatically with repercussions on rates and services. Due to higher demand and lower capacity managed by carriers, shippers may have to wait for weeks to load a container. CLECAT and FIATA have now expressed their Members’ concern about this situation in no uncertain terms. These European and the Global associations of freight forwarders stress the importance of the availably of sufficient capacity to ensure the facilitation of world trade and are insistent that carriers should respect ongoing agreements and contracts.

Both FIATA and CLECAT say they are open to discuss with the ocean carriers these current developments and the difficulties they are facing, but cannot ignore their members’ concerns with the poor level of service. Additionally their latest statement questions whether the problems can merely be explained by an increased demand for shipments from Europe to the Far East. Mr Jens Roemer, Chairman of the FIATA WG Sea, pressed home this point saying:

“We witness an increase of vessels being taken out of circulation, which in our opinion contradicts the current increase in demand. On some routes shipping lines only accept bookings for sailings as far away as in four weeks’ time. Furthermore, it has been extremely difficult for the industry to deal with blank sailings.”

One particular bone of contention with the two freight forwarding groups is typified by the fact that last week a number of carriers announced a Peak Season Recovery Surcharge (PRS) on cargo moving from Europe to the Far East. They point out that, as so often with container surcharges, separate announcements from different carriers all appeared within a matter of days. FIATA and CLECAT say they cannot silently absorb costs that shipping lines impose as they no try to apply the new PRS for shipments booked subject to tariffs and agreements valid at the time of booking. They insist that ongoing contracts and fixed agreements should be respected in order to keep sustainable relationships in the supply chain.

The two however go much further than that, CLECAT and FIATA question whether the PRS can justifiably be classified as a surcharge at all. Surcharges by their very definition relate to sudden changes in variable costs incurred by carriers, such as bunker prices, port congestion and currency fluctuations. FIATA and CLECAT question whether such changes in the variable external costs have actually occurred in this situation.

This is hardly new ground, a FIATA press release back in November 2014 raised this very point with Robert Keen, Chairman of FIATA's Multimodal Transport Institute and Director General of the British International Freight Association (BIFA) pointed out a whole host of miscellaneous extras which were being levied on unsuspecting shippers, and it came up again when CLECAT’s Director General, Nicolette van der Jagt, made the same points in a statement issued just two months later. Meanwhile shippers face a continuing uncertain future as the situation fluxes beyond their control.

N.B. For more information on the various container alliances from our archive simply type a suitable keyword into the News Search box at the head of the page.