International Maritime

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Overcapacity , weak demand force carriers to delay trans-Atlantic surcharges

By Greg Knowler

Carriers in the trans-Atlantic are delaying Red Sea-linked surcharges and rate increases meant to cover equipment repositioning and rising vessel costs , an indication of the unfavorable — for them — supply-demand situation that continues to grip the westbound trade lane .

Hapag-Lloyd postponed its “ contingency surcharge ” of $ 500 per TEU from North Europe and the Mediterranean to Canada , the US and Mexico from Jan . 21 to Feb . 1 , while Mediterranean Shipping Co . ( MSC ) delayed its “ emergency operation surcharge ” from the West Mediterranean to North America of $ 1,200 per TEU from Jan . 20 to Feb . 1 .

CMA CGM will also delay by a month — from Feb . 1 to March 1 — a North Europe / Mediterranean – North America rate restoration of $ 300 per TEU .

“ I don ’ t think it ’ s a case of carriers not wanting to increase rates , but such are the trans-Atlantic North Europe to North America market dynamics that it is actually surprising rates have held firm for as long as they have ,” Simon Heaney , senior manager of container research at Drewry , told the Journal of Commerce .

“ It is actually surprising rates have held firm for as long as they have .”

Carrier CEOs expressed concern that trans-Atlantic rates were at loss-making levels following last year ’ s third-quarter results , but the Europe – North America spot market has deteriorated even further since then .

Drewry ’ s World Container Index shows rates from Rotterdam to New York have ticked lower since August , with Jan . 25 rates of $ 1,576 per FEU down slightly from $ 1,587 per FEU in early August . This is also reflected in other rate indices , with Platts , a sister company of the Journal of Commerce within S & P Global , showing average spot rates of $ 1,395 per FEU in early August and $ 1,200 per FEU as of Jan . 24 . Rate benchmarking platform Xeneta had North Europe – US East Coast rates at $ 692 per FEU as of Jan . 25 , down from $ 843 per FEU on Aug . 3 .

MSC and CMA CGM tried to levy freight-all-kinds ( FAK ) rate increases of $ 5,000 per FEU and $ 3,500 per FEU , respectively , effective Jan . 15 , but the increases have had no effect on a trade lane awash with capacity and facing weak import demand from the US .

US imports from North Europe tumbled another 9.5 % year over year to 164,100 TEUs in December , the

11th straight month of falling volume compared to the previous year , according to the latest data from PIERS , a sister company of the Journal of Commerce . For the full year , westbound trans-Atlantic volumes were down 13.5 % from 2022 .

Not enough blank sailings

While demand falls , carriers are not removing a material amount of supply . In January , 10.8 % of the available capacity was blanked on the westbound trans-Atlantic , amounting to 76,000 TEUs , according to Sea-Intelligence Maritime Analysis . Carriers as of mid-January had announced just 1.2 % of capacity blankings for February and 0.8 % for March .

“ The trans-Atlantic demand is really low ,” an ocean forwarder based in Europe told the Journal of Commerce mid-January . “ If you have a lot of demand and less supply , you can increase rates , but if it is the other way around you can ’ t . There is enough space on the trans-Atlantic and no equipment issues , so there is no way to raise rates .”

US imports from North Europe decline through December

Containerized US imports from North Europe , in TEUs , with year-over-year change

TEU volume

Trans-Atlantic spot rates bottom out in Q4 2023

Container spot rates from North Europe to the US East Coast , in USD per FEU

USD per FEU

200,000

150,000 100,000 100,000

50,000

Source : S & P Global

$ 8,000

$ 6,000 $ 1,000 $ 4,000

$ 2,000

Source : Platts , S & P Global

TEU

Year-over-year % change

North Europe to US East Coast

10 %

0 %

-40 -10%

-20 %

-30 %

Year-over-year % change

© 2024 S & P Global

© 2024 S & P Global

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16 Journal of Commerce | February 12 , 2024 www . joc . com