Freight rates started climbing again on the major East-West trade routes in December after the slight reduction seen in November.
The lull did not last long…the reduction in freight rates for goods leaving China on major East-West trade routes since the end of October has already run into problems. Rates started rising again in December.
On the other hand, West-East freight rates on Europe-Asia routes and in the transatlantic trades, which had increased in the first half, fell back again at the end of the year. On these routes, space is available. The shipping companies have decided that their ships are better part-filled than empty at a time when they are having to meet the cost of a major effort to reposition their empty containers.
Supply chain security favours long-term contracts
The persistence of the pandemic has made economic operators worldwide conscious of the need to prepare to live with Covid-19 on a long-term basis, which has upset business plans prepared in the belief that operations could return to normal in 2022. The prospect of a general breakdown in traffic flows is causing anxiety.
The shipping companies are clearly in a position of strength as they seek to conclude longer direct contracts with the leading shippers in a contract negotiation season which is currently in full swing. Securing space and containers on a long-term basis is the number one priority of supply chain managers, who are having to submit to this new market requirement whether they like it or not.
The shipping companies are also putting increasing pressure on forwarders. Maersk, for example, is pushing its forwarder customers who are looking for space in January to make use of its online booking services on a take it or leave it basis. This approach, which was proposed on a provisional basis in October, has now taken on more concrete form.
We note, too, that the shipping companies invested massively in December in activities linked to cargo-handling, traffic flow management and digital services.
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