Don’t Let Transpacific News Crowd Out Equal Transatlantic Challenges

We have written multiple times about the ongoing problems with the eastbound transpacific but want to be sure shippers are aware that equal congestion, rate and capacity issues exist on the transatlantic.

U.S. exporters are unable to get containers, because carriers are sending them back to Asia empty. The attention focused on backlogs in Southern California port congestion and general supply chain congestion misses what has been happening in Europe and on the North Atlantic. As TOC continues to work to ensure adequate space and fair rates for our customers on this lane, we wanted to focus on three issues that are working against the trade and in favor of carriers.

Triple digit carrier surcharges

In our recent market advisory, we addressed the issue at Hamburg port over the Christmas holidays. This issue led them to stop accepting export containers, which caused vessels to cut and run, leaving hundreds of containers behind. The cascading issues of too many containers in all the wrong places have led carriers like Hapag Lloyd to introduce an Equipment Imbalance Surcharge (EIS) of $200/40′ container.

The supply and demand imbalance is also giving European carriers the space to try to implement a feature of TPEB contracts, Peak Season Surcharges. These additional per-container costs traditionally appear in contracts between June and the end of November and are meant to capitalize on periods of high demand. Until the pandemic, the circadian rhythm of shipping was such that the majority of cargo included fall, back-to-school, and holiday consumer goods moving to the U.S. from Asia. The slack season would be December and January, a short burst of outdoor spring merchandise preceding Lunar New Year, and then a gradual resumption by the start of the third quarter.

CMA-CGM, one of the largest carriers in the world, announced their intent to impose a $400 Peak Season Surcharge on the transatlantic, which is heretofore unheard of. Is this opportunism, or does it reflect a change in things from carriers whose routes and reach are increasingly global? Only time will tell as we move through 2021.

Large spot market variances

TOC, like most NVOCCs, hold time-volume contracts—we commit to pay ‘x’ per container on behalf of our clients in exchange for ‘y’ number of slots (or container bookings) per week. When we work with our clients on bids and forecasting, we stress the importance of accurate figures because in non-pandemic years, this ensures we have enough space throughout the year.

Increasingly, carriers are doing two things. They are accepting and prioritizing spot rate cargo at significantly higher rates than the contract rates they agreed to while simultaneously demanding contract holders pay an additional premium or surcharge to protect their slots. This protection doesn’t even come with a guarantee of equipment or a slot on the vessel. This can be seen in what is happening in ports throughout Europe to relocate empty containers and get vessels back on schedule.

ProTrans Global, the European division of TOC located in Germany, is a member of CLECAT, the European forwarders association, who is pushing back on these additional costs and demanding the Competition Directorate of the European Commission get involved. This joint letter from CLECAT and the European Shippers Council lays out in stark terms what is happening.

Carriers setting the stage for higher rates during upcoming contract period

TOC’s position as a market leader on the North Atlantic means that we have the ability to push back on many of these proposed surcharges and the retail-announcement level increases. Our teams in the United States and Germany work together, assembling market intelligence on both sides that protects our clients and prevents carriers from making claims that we can easily confirm or debunk.

We are focused on delivering three things for clients in the coming weeks and months:
● Protecting space allocations
● Mitigating surcharges and increases
● Drawing on years of positive, cooperative relations to blunt carriers’ opportunistic overreach in higher rates in our next contract

As always, work with your TOC account manager who is your primary partner for allocation, rate and service questions. As we approach a year of pandemic-driven business adaptations, we, along with the world, are cautiously optimistic that vaccinations will pave the way to a return to more accelerated supply chains where people can once again work together in greater proximity without fear of infection and volumes and service are driven solely by economic factors and less by global health constraints