Shippers Looking To Renegotiate Rates And Dock Strikes Put More Strain On Carriers

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  • By Mike Wackett 29/07/2022 The threat of dock strikes at Felixstowe and Liverpool next month, together with the potential resumption of industrial action at German ports, add to the supply chain woes of Asia-to-North Europe shippers.
  • On the transpacific, spot rates from Asia to the US west coast continued to tumble, with the FBX shedding another 6% this week, to $6,593 per 40ft, representing a year-on-year decline of 64%.
  • “Consumers are becoming more selective in their purchases and buying only what they need,” he said, adding that product at retail stores “is not moving off the shelves quickly enough”.

The supply chain problems of shippers from Asia to North Europe are made worse by the possibility of dock strikes in Felixstowe and Liverpool next month as well as the likely resumption of industrial action at German ports as reported by The Loadstar.

Increased congestion 

In addition, despite weaker demand, the possibility of further carrier network interruption as they attempt to manage increased congestion at North European hub ports is likely to moderate the decrease in container spot rates on the trade lane.

Carriers can expect demands to renegotiate when the peak season fades and the slack season starts since nearly half of shippers no longer have confidence in the stability of contract prices, which are under pressure.

As carriers raised their discounts to offset booking gaps, this week’s Freightos Baltic Index (FBX) reading for Asia-North Europe saw a decline of 6%, to $9,641 per 40ft.

Selective purchases 

For Mediterranean ports, where demand has held up better, the FBX component edged down by a more modest 1.5% on the week, to $11,848 per 40ft.

On the transpacific, spot rates from Asia to the US west coast continued to tumble, with the FBX shedding another 6% this week, to $6,593 per 40ft, representing a year-on-year decline of 64%.

US-based analyst Jon Monroe said the US retail trade had been “hit hard” and most of the big retailers were slowing or limiting deliveries.

“Consumers are becoming more selective in their purchases and buying only what they need,” he said, adding that product at retail stores “is not moving off the shelves quickly enough”.

More ocean carriers will report record second-quarter results in the coming weeks, but there are signs that the liner industry boom of the past two years is beginning to tail off.

Indeed, in its July Asia-Pacific market update, Maersk refers to a “broader weakening in demand”, adding: “The outlook remains highly uncertain, and we mainly see downside risks to our base scenario.”

Long-term contract

This month, the freight rate benchmarking company Xeneta surveyed its long-term contract client base and discovered that many respondents were “seeking to renegotiate contracted rates, given the recent spot market decreases,” which highlights the downside risk.

“The indicators are evident, there is a shift in sentiment as some fundamentals evolve,” CEO Patrik Berglund said. The majority of our customers, who export in huge volumes, are now in a better-negotiating position. 44% of respondents to our survey said they were no longer confident in the stability of long-term contracts; of that group, 22% said they were more likely to allocate lower volumes only to cheaper contracts. Meanwhile, 22% said they preferred to move allocation to the spot market as soon as prices fell below long-term rates.

 

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Source: The Loadstar

 

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