As the Lunar New Year approaches, ocean carriers on the Asia-US trade lane are aggressively pushing for General Rate Increases (GRIs), aiming to capitalize on the seasonal demand surge and an already tight market environment exacerbated by the Red Sea crisis. This crisis, prompted by security concerns and attacks against commercial shipping, has led to significant rerouting of ships and a tightening of vessel space, compelling carriers to seek GRIs ranging from $600 to $1,000 per forty-foot equivalent unit (FEU) to take effect in early February.
This move comes at a time when the shipping industry is still grappling with the fallout from the Red Sea crisis, which has prompted a faster pace of rate increases compared to the onset of the COVID-19 pandemic. According to data from Xeneta, shipping costs from the Far East to Europe surged more than 200% in the first 52 days of the crisis, outpacing the rate increases witnessed during the pandemic’s early days. The rapid escalation in rates, driven by the sudden nature of the Red Sea crisis, is creating significant disruption, arguably more severe than the early months of the pandemic.
Despite carrier efforts to implement GRIs, there is growing skepticism among importers, carriers, non-vessel-operating common carriers (NVOs), and industry analysts regarding the sustainability of these rate increases. Most industry insiders expect rates to decline once the Lunar New Year celebrations begin in Asia, leading to a temporary closure of factories and a dip in demand.
The push for rate hikes is further complicated by the industry’s call for more transparency around surcharges. Shippers are becoming increasingly wary of opaque surcharges, including those related to the Red Sea crisis, such as peak season and EU ETS surcharges, Suez Canal transit fees, and re-routing costs. The lack of clarity and transparency in these additional costs has led to frustration among shippers, who are calling for carriers to be more forthright about the origins and justifications of these charges.
While the carriers justify the GRIs and surcharges as necessary responses to the market’s tightness and the unforeseen disruptions caused by the Red Sea crisis, there’s a growing perception among shippers that carriers might be seizing the opportunity to maximize profits. However, industry analysts suggest that rates could stabilize or even decline once carriers adjust to the capacity crunch and shipping networks normalize, despite the current challenges.
The shipping industry remains at a crossroads, with carriers striving to navigate through the immediate challenges posed by the Red Sea crisis and shippers advocating for greater fairness and transparency in rate setting. The coming weeks, leading up to the Lunar New Year and beyond, will be critical in determining the trajectory of shipping rates and the industry’s ability to reconcile these conflicting interests.