Could red hot container rates be peaking? Photo / 123RF
Could red hot container rates be peaking? Photo / 123RF
Changes afoot in container shipping, including spot rate freezes and a new entrant to the New Zealand market, are providing a glimmer of hope for the country's beleaguered importers and exporters. Many observers, however, are cautious in their optimism.
CMA CGM and Hapag-Lloyd, both amongst the largest global shipping companies,announced rate freezes in recent days.
CMA CGM advised customers the freeze is effective immediately and will remain in effect until February 1, 2022.
"The Group is prioritising its long-term relationship with customers in the face of an unprecedented situation in the shipping industry," the notice said.
Hapag-Lloyd told maritime business information service Lloyd's List it has instituted a rate freeze "for the time being".
In addition, ANL Singapore, a subsidiary of CMA CGM, cancelled a Christmas levy of some $300-$600 per container (depending on size) due to hit New Zealand importers later this month.
"Further to the notice sent on Sept 3, 2021 referencing the China to Australia East Coast and New Zealand Peak Season Surcharge, ANL Singapore would like to advise this is no longer applicable," the company told customers on September 13.
ANL parent CMA CGM did not respond to a request for comment.
Separately, Taiwanese line TS Lines will add a new dedicated service between the Port of Tauranga and China later this month, making a small but welcome addition to shipping capacity.
The sailing will be weekly from the end of October, employing relatively small 1700 TEU (20-foot equivalent unit) vessels.
Chris Edwards, president of Customs Brokers and Freight Forwarders of New Zealand (CBAFF), said the addition, though welcome, may not be sufficient to introduce price disruption at this stage. Rates are not yet final.
Edwards said he isn't yet sure what to make of rate freezes and the kiboshed surcharge.
"Prices have risen so high and so fast that on the one hand a pause is certainly welcome, but of course they're also freezing rates at these historic highs, so I'm not sure all importers will describe it as relief.
"I'd love to think this all suggests a better balance between supply and demand in the future but I'm just not sure that's the case."
Michael Bell, a professor at the University of Sydney Business School and an expert in maritime logistics and transport, said shippers are right to be skeptical that the changes will leave them better off.
"If freight rates are peaking then it makes sense [for shipping companies] to announce a freeze and try and take some credit for it," he said, noting that some major global retailers like IKEA are increasingly taking transport arrangements into their own hands, chartering vessels to ship goods and purchasing their own containers.
Bell also said shipping companies are likely interested in locking in, under contract, as much volume as possible while rates are so high.
"With such a strong market for container shipping it makes sense for lines to lock in high rates through long term contracts and remove capacity from the spot market. With so little capacity available on the spot market, freezing the spot rate has very little impact on revenue."
Taiwanese line TS Lines will add a new dedicated service between the Port of Tauranga and China later this month, making a small but welcome addition to shipping capacity. Photo / NZME
The Covid-19 pandemic has caused historic disruptions and skyrocketing prices in the global supply chain, and in particular in container shipping.
Shippers forced to swallow massive freight cost increases and a slew of extra levies have become increasingly concerned about the market power wielded by the global shipping lines, organised into just three powerful alliances.
Pressure is now rising on competition authorities around the world to investigate, providing another possible reason for the recent changes.
In the US, President Joe Biden has asked regulators to crack down on consolidation in a range of industries, including shipping. And the US Federal Maritime Commission has launched an inquiry into the surcharges levied by some lines.
And earlier this week the chairman of the Australian Competition and Consumer Commission (ACCC) announced the regulator will consider the competitive structure of the shipping industry in a stevedoring monitoring report due out in November.
"...We're going to look at to what extent is this is a structural problem due to the fact that you've got concentration in shipping which has occurred a lot or to what extent is it a short-term issue due to the spikes in demand as people consume more goods and less services as Covid interrupts the supply chain," chairman Rod Sims told the Australian Broadcasting Corporation.
The ACCC has also promised to make a more narrow determination on competitive practice related to containers and port operators.
New Zealand's Commerce Commission is not actively pursuing the issues.
Last year CBAFF had preliminary discussions with the agency about shippers' concerns, including shipping lines' co-ordinated rate rises, surcharges and deteriorating service.
Last month a commission spokesperson said: "the commission continues to follow issues in the shipping supply chain sector and seeks information on anticompetitive conduct relating to the shipping supply chain sector."
