Ocean Freight General Rate Increases - 2023

The General Rate increase for full container freight

A General Rate Increase (GRI) for cargo from Asia to the United States has been announced, set to take effect from June 15, 2023. It is important to note that forwarders are required by the Federal Maritime Commission (FMC) to announce possible rate increases at least 30 days in advance. However, remember that these are carrier announced GRIs and may be mitigated.

If carriers implement this charge, Scarbrough International, a leading logistics provider, will start charging the GRI on all Full Container Load (FCL) and Less than Container Load (LCL) cargo departing from the affected locations on June 15, 2023.

Scarbrough International is actively working with carriers to waive or mitigate these charges and will provide updates on any confirmed mitigation or delay of the rate increase.

Freight Market Update 2023

Import freight rates from China are currently low, with some carriers yet to increase their rates. However, rate restoration charges are being announced for specific trade lanes to maintain service levels. It is worth noting that there was a 1% decline in total sailings in March, indicating a decrease in global demand.

On a positive note, global sea freight schedule reliability has improved to 60.2% in February 2023, showing a year-on-year increase of 26%. This improvement can be attributed to reduced congestion and better port conditions. Furthermore, global average vessel delays have decreased to 5.29 days, two days lower than in February 2022.

Shipping analysts at HSBC have declared that the container shipping industry has reached its lowest point and is now on the path to recovery. They suggest that spot rates have likely hit their lowest point and anticipate a rebound in the market.

A 'Green' Wave

Carriers are making significant investments in methanol-ready vessels as part of their efforts to become more environmentally friendly. Companies like Cosco and Maersk have ordered ships capable of using methanol as a fuel source. Also, carriers and Singapore's top bunkering hub are developing infrastructure to accommodate increased methanol activity.

In line with the International Maritime Organization's (IMO) regulations, which came into effect in January 2023, all ships are now required to calculate their Energy Efficiency Existing Ship Index (EEXI) and report their annual operational carbon intensity indicator (CII). To meet these requirements, carriers have begun reducing vessel speed and increasing transit times.

Looking ahead, the European Union (E.U.) plans to enforce carbon taxes on shipping lines transporting goods to and from Europe starting in 2024. This will likely result in a minimum 35% price increase for shipping lines unless they switch to alternative fuel sources. However, alternative fuels like LNG are still limited, and a transition to such fuels could raise costs by up to 340%.

Market Insights by Region

Asia to Asia Pacific:

Volume is gradually recovering after the holidays in major exporting countries in Southeast Asia. Carriers are reporting 80-90% utilization rates, and rates are stabilizing. Making bookings for time-sensitive shipments, preferably on direct services, is advisable.

China / North Asia:

GRI has yet to be announced for this region, and securing space is currently relatively easy due to ample capacity. Carriers respond to the weak market performance by implementing regular blank sailings or rescheduling sailings. The airfreight market has remained stable since late March, with rates slowly improving but still restrained by limited demand.

South East Asia:

Airfreight rates have seen slight increases, and space limitations are present. No GRI has been announced, and market conditions are sluggish. Blank sail Ings have not been announced, and rates are expected to remain relatively stable.

India:

Terminal operators in Nhava Sheva have announced a price increase to commence later in May. However, the Container Shipping Lines Association (CSLA) argues that the gains are unjustifiable given the current congested port situation and reduced capacity.

North America:

GRIs from the West Coast of the United States to Australia/New Zealand and New Caledonia have been announced and will be effective from June 5. Due to industrial disputes, extensive delays have been reported at the Long Beach and Los Angeles ports. While the level of trade entering the country is inconsistent, U.S. exports have shown a modest positive increase since January. Ongoing chassis shortages continue to cause pickup and delivery delays. On the airfreight side, weak demand has resulted in additional space availability.

Europe and U.K.:

The market in Europe and the U.K. remains stable, with no blank sailings announced. Ample space is available, rates are steady, and no price increases are expected soon.

Pakistan:

Orders from more significant exporters in Pakistan are increasing, although inflation in the United States and the European Union affects small to medium-sized exporters. Blank sailings have commenced, and shipping lines may push for a rate increase in May, although no official GRI announcement has been made. Airfreight pricing is flat, and space is readily available.

Bangladesh:

No blank sailings are expected in Bangladesh, and equipment availability is good. No GRIs are scheduled in the short term. Factories have been loading cargo in preparation for Eid, resulting in some space pressure due to significant cargo arrivals. Airfreight rates are expected to stabilize soon.

Australia Ports:

In February, container volume (TEUs) experienced a significant decline across major ports, with Botany down 26%, Melbourne down 20%, Fremantle down 17%, and Brisbane down 8%. Hutchison Ports and VICT (Melbourne) have announced intentions to increase landside charges and introduce new fees at their operations.

*Delays vary across different terminals in Australia, ranging from minimal to one or two days.

N.Z. Ports:

Major ports in New Zealand are expected to adopt fixed berthing windows, which will enhance service reliability for shipping lines and their customers.

Economic Outlook

Europe: After a contraction at the end of 2022, Europe is projected to experience slight growth in 2023, gradually improving in the following years. However, high inflation and strict financial conditions may threaten the region's economy.

Americas: The United States is currently experiencing a slowdown in economic growth as credit tightens. The employment and income improvements initially drove consumer spending have faded, resulting in sluggish growth expected for the second half of 2023. The unemployment rate is projected to rise, and declines are anticipated in the construction sector.

Asia Pacific: Led by solid growth in China and India, the Asia-Pacific region is expected to see a rise in GDP. However, weak export markets may restrain growth in manufacturing. Housing markets have shown signs of recovery, but the availability of new housing construction has decreased.

Stay informed, and plan ahead with TGL!

Shippers must stay updated on the latest developments in the freight market to manage their logistics operations effectively. Understanding rate increases, market trends, and environmental initiatives can help businesses make informed decisions and navigate the complexities of international shipping. Scarbrough International remains committed to working closely with carriers to mitigate charges and provide its clients with the most efficient and cost-effective solutions.

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