Industry News

Freight Rate Update: December 2019

Ronald Vincent | M.E. Dey & Co.

Here is the latest update on current freight rates for both Import and Export cargo. M.E. Dey provides the best possible rates available to our clients by reviewing various carrier options. We’ll keep you advised and informed as trade updates are announced.

IMO 2020 – What is it and how will it affect ocean freight rates?

The International Maritime Organization (IMO) is the United Nations specialized agency that is responsible for the safety and security of shipping and the prevention of marine and atmospheric pollutions by ships. IMO 2020 is the latest regulation from the IMO to reduce the allowable Sulphur in ships’ fuel oil also known as bunker fuel. The objective is to reduce Sulphur emissions from ships by 77%.

Where are we on IMO surcharges? 

There continues to be a lack of standardization amongst steamship lines with regards to IMO related surcharges. We have seen steamship lines publish updated BAFs that incorporate an IMO surcharge while others are implementing a new surcharge separate from BAF.

Increases are ranging from $ 20 to $ 150 so far. This wide range seems to be the result of whether a carrier is using scrubbers or utilizing the new higher grade low sulfur fuels. Currently, low sulfur fuel is about double the price of high sulfur fuel. Steamship lines that have installed scrubbers can continue to use high sulfur fuel at the lower price as the scrubbers ‘clean’ the exhaust and keep them in compliance with IMO 2020 emission levels. We are seeing that steamship lines are mostly setting BAF and IMO levels through December 31st at this time.

What does this mean for companies that utilize ocean transportation services?

The regulation will increase costs to carriers for fuel and/or to retrofit their vessels with an exhaust cleaning system. These additional costs are expected to be passed on to shippers in the form of rate increases and/or additional surcharges such as a low Sulphur surcharge (LSS). At this time a standard has not been adopted industry wide and we expect diversified methods to be implemented by carriers to recoup additional fuel costs. As well, most carriers have not announced surcharge or rate levels for 2020.

This is a link to the IMO’s website with additional information on this regulation.
http://www.imo.org/en/MediaCentre/HotTopics/Pages/Sulphur-2020.aspx

 

Trans Atlantic Westbound (import)

 

  • Space is still very tight with vessels sailing at capacity. We encourage customers to book as least 2 weeks in advance.
  • Rates are stable at the moment, but increases may be implemented if capacity remains tight.
  • The U.S. has implemented additional tariffs on some EU origin products. To date the additional tariffs have not impacted shipment volumes and space remains tight.

 

Trans Atlantic Eastbound (export)

 

  • Rates remain stable. Equipment availability has improved, but some origins/carriers continue to have equipment shortages.
  • We encourage customers to book at least a week in advance.

 

Trans Pacific Westbound (export)

 

  • Rates remain stable. Equipment availability has improved, but some origins/carriers continue to have equipment shortages.
  • With some carriers we are having to book 2 weeks in advance.

 

Trans Pacific Eastbound (import)

 

  • In November the steamship lines were somewhat successful with having GRIs stick at the beginning of the month. The combination of blank sailings and a surge of cargo after Golden Week helped prop up rates.
  • Starting in the second week of November rates started to slide. Some analysts expected front loading of shipments to avoid upcoming increased tariffs, but we did not see significant evidence of this.
  • Container volumes from Asia to the U.S. are expected to continue to decline through the end of the year. Through October imports from China are down 6.9% compared to the same time period in 2018.
  • This has some industry experts predicting that container volumes will be soft in January as they are expecting U.S. inventory levels to remain high. Others say it is too early to make predictions until holiday retail sales data is available.
  • As mentioned last month, it is important to keep in mind that Chinese New Year is earlier in 2020 than it has been the past few years. It is January 25th. With most Chinese factories closed for at least a week, we expect significant rate increases at the beginning of January.


M.E. Dey and Co. monitors the market daily to find competitive rates that pair well with exceptional transportation services. We provide fixed rate contracts in addition to standard market rates. Contact us to talk with a representative or request a quote to get started.

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