Container Premiums: Trans-Atlantic shippers hit with new surcharges

Premium service fees paid on top of base container shipping rates have emerged as a prerequisite for some spot market booking from North Europe to the US East Coast for the first time amid a supply crunch of space and equipment at European ports.

While premium surcharges have become a common requirement for carriers to take spot bookings in the trans-Pacific market, supply and demand was more balanced in the trans-Atlantic westbound trade lane before a six-day impasse at the Suez Canal in March disrupted normal service schedules.

"Premium service fees are a new feature in the trans-Atlantic with a couple prominent carriers asking $1,000/FEU on top of FAK rates to guarantee equipment and space," a UK-based shipowner source said. "Demand is strong and supply is very tight."

Freight-all-kinds rates from North Europe-to-East Coast North America were assessed at $4,300/FEU on May 20, including Peak Season and Equipment Imbalance Surcharges but excluding premium service fees.

Trans-Pacific premiums are not guarantees

Premiums over the FAK rates still reigned supreme in the Asia-to-North America container market, and "they are not coming down anytime soon," a logistics provider said.

One source estimated that the premium surcharge was around $2,500-3,000/FEU from Southeast Asia to West Coast North America, and $3,000-5,000 to the East Coast.

"On FAK rates you can't get a space. There are premier rates, diamond rates to get a space," a freight forwarder said. "This is just to try. There is no 100% [confirmation] of space."

Other sources estimated premium-inclusive rates were in the $8,000-$10,000/FEU range for Southeast Asia-to-East-and-West Coast North America trade lanes.

But cargo roll overs were becoming common even for shippers that paid the premium rates, and there were still no guarantees on when the consignments would get shipped amid a widespread lack of schedule certainty.

"If you pay the premium, you lock in space, but that does not give you a booking confirmation on when the cargo would be shipped," the logistic provider said.

Platts Container Rate 23 – Southeast Asia to West Coast North America – was assessed at $4,600/FEU on May 20 on an FAK basis, while PCR25 – Southeast Asia to East Coast North America – was assessed at $5,550/FEU.

There are concerns that FAK rates as well as premiums will increase further in June, as carriers have announced steep General Rate Increases for the month.

Meanwhile, carriers are also levying a Container Imbalance Surcharge of around $200/FEU from Asia to the US on top of premium service fees due to empty container shortages at Asian export hubs and the long lead time to return containers from the US.

Those delays and premium fee requirements have pushed many shippers into the air freight market, but even there, the situation is now quite similar to what has happened in ocean freight markets: rates have increased sharply and cargoes are getting rolled over due to a lack of space.

Shippers bid the premium market higher

On the heavily trafficked trans-Pacific eastbound trade lane, some shippers are willing to bid well above $10,000/FEU for space on ships departing China in May or June, but demand was such that shipowners could not offer space that was not available.

"Some customers are willing to pay anything," a US freight forwarder said. "A carrier told us that someone was willing to pay as much as $20,000/FEU on the spot market but could not get the booking. A shipper with 20 containers of high-end luxury goods can pay that much and still come out ahead."

Container rates from Asia to Europe have hit fresh all-time highs as logistical issues continue to constrain the market and demand remains firm through to July, limiting availability on ships.

Platts Container Rate 1 - North Asia to North Continent – was assessed at $12,000/FEU on May 20, up $1,500/FEU from the week earlier. This increase reflected a near ten-fold increase from the $1,300/FEU assessed on this route a year earlier.

Throughout all this, carrier performance has taken a big knock as delays have meant the number of containers arriving at ports during their scheduled windows has fallen considerably.

In an effort to get sailings, and thus performance back on track, some carriers are eyeing void sailings in May and June, when they take a vessel out of the loop in a bid to either rebalance with demand or to get their delayed services back on schedule.

"Void sailings are back, rates are up again, and customer satisfaction has never been lower," said another freight forwarder. "These rates are ridiculous. You can't guarantee product no matter what you pay, that's the nature of the delays."

Despite these obvious issues in the market, there still appears to be some resistance to premium rates in the Asia-to-Europe trade lane, with carriers instead opting to increase FAK rates rather than add premium pricing to the region.