Across the ocean freight industry, most negotiations for yearly contracts with major shippers, smaller importers, and NVOCCs have come to a close. A tumultuous year of shipping has seen record-high prices, fully-utilized capacity, and unprecedented challenges for both the shipper and carriers as economic growth accelerates in much of the world.
The most striking thing about this year’s market is how it was dictated largely by capacity over price. While prices have skyrocketed, the limiting factor has truly been the ability to get cargo on to the ships. With slowdowns at ports and equipment shortages exacerbated by COVID-related staffing reduction, being able to guarantee that product will move on boats loaded to capacity has been paramount.
This has led to a larger-than-ever season of BCO contracts, with rates hitting almost twice as much as they were at the same time last year. However, a lot of this has come from shippers with a past relationship expanding and extending their contracts, as the huge demand has allowed carriers to be choosier about their clientele. As space on the vessels is the primary driver, many shippers allocated larger amounts of their cargo to their BCO contracts.
A big difference with 2021-2022 rates for previous years has been the ability of the carriers to do away with some perks that have been normalized as part of the process. Carriers were typically lenient about granting free storage time to shippers, giving them some extra days beyond the contracted allotment, but now carriers will be sure to be more stringent. This tracks along with the carriers’ stated intention to seek damages on unfulfilled shipments, a new commitment to holding their customers accountable for their contracted volumes.
Prices are showing a stark increase against last year. While it’s a hard comparison given the aberration of the 2020 supply chain, industry price trackers show that this year an Asia-to-East-Coast 40’ container will cost about $4,200, whereas in 2020 it was $2,400. Similarly, West Coast prices have jumped from about $1,400 to $3,200. Inland destinations can get above this, peaking record levels for some final deliveries. Importers need to plan not only for the increased tariffs, but shipment costs at all-time highs.
Capacity issues show no sign of slowing down. Already based on the trends, the full amount of capacity available—and then some—has been spoken for. NVOs will likely see high demand for their contracted space as pro-rated weekly or monthly space limits will be strongly enforced to ensure all BCO contracts are able to be loaded. There appears to be no relief on this in the immediate horizons, so all shippers need to plan contingencies into their import plans.
JM Rodgers’ unique “Freight Management” product allows us to apply our services either via our NVOCC rates or using a client’s BCO contract, ensuring that they will always have a continuity of service on a high level no matter where they are booking their freight. Our brand-new tracking system gives real-time global visibility to all shipments, making a difficult year more manageable.
For more information on what we can do to help you right now, please contact our SVP of Sales, Andrew Galloway, at (973) 726-5340, or via email at firstname.lastname@example.org.