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Container shipping market showing weakness
Spot rates on the trans-Pac and Asia-Europe trade lanes have fallen below seasonal average levels. This is despite the traditional peak shipping season getting started. Many view this as a more obvious signs of emerging weakness. Average spot rates from Asia to the USWC are down almost 20% since January at $7,447 per FEU. Current Asia-North Europe rates are at $5,946 per TEU. They have lost almost 33% of their value during the same period.
As of last week, average spot rates on the trans-Pac have been below the long-term rate since June 1st. The spot market on Asia-Europe is quickly closing in on contract levels. However, analysts believe deteriorating economic conditions in North America and Europe, combined with excess inventory levels, have dampened demand for container shipping.
Declining spot rates appear to signal a weakening market. Lars Jensen, CEO of Vespucci Maritime, said, “It is still too early to conclude with certainty, but the data from last week and this week begin to shift the odds to favor a weaker market in the coming months.”
Jensen also said that we will begin to see shippers pushing back on contracts in terms of renegotiations. Additionally, they might shift volumes to the spot market and not deliver the full contracted volumes to the carriers.
Peter Sand, chief analyst at Xeneta, dismissed the likelihood of a collapse in rate levels. He believes contract rates on the trade lanes out of Asia to both the U.S. and Europe will follow the spot market on a gradual decline. He also said there will be spikes in prices along the way.
OSRA 2022 rules on detention & demurrage go into effect
OSRA 2022, the new reform that governs detention and demurrage fees, went into effect Friday. Container lines are now forced to certify that fees are reasonable and incentivize cargo movement. Under OSRA 2022, carriers are subject to fines if they charge detention and demurrage for situations beyond a shipper’s control. This includes the inability to move cargo because of congestion, a lack of appointments, or a shortage of chassis.
Marine terminal operators have been removed from the final version of OSRA’s certification and invoicing requirements. Therefore, they can continue charging reasonable fees to move cargo. Marine terminals haven’t all welcomed the new laws surrounding detention and demurrage. They believe it will dull their ability to levy fees as incentive to move cargo and equipment. They have pushed back by saying that the fees are not used to generate revenue.
SSA Marine President Ed DeNike said the increased regulatory burden will result in more paperwork and further slow operations because marine terminals will be more reluctant to impose storage fees, and the cost of both will ultimately be borne by shippers.
About O’Neill Logistics
O’Neill Logistics is a leading 3PL with operations in Rancho Cucamonga, CA; Savannah, GA; and Newark/Monroe, NJ. We service many verticals including Garments, Fashion Accessories, Footwear, Furniture, Home Goods, & Electronics. Additionally, we offer omni-channel distribution and all value-added services. Lastly, we focus on retail “drop shipment” fulfillment and item-level fulfillment services with same-day service offerings.
O’Neill Logistics has over 2 million square feet of state-of-the-art facilities. Additionally, we offer dray services to support the warehouses and provide distribution to retailers and wholesalers. Our reliable 3PL platform combines sophisticated technology with robust, flexible processing designs and speed-to-market gateway models.
Lastly, we aim to simplify your supply chain. We deliver exceptional service and can optimize your operational performance. Therefore, we aim to build, protect and foster strong business partnerships.
