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General Rate Increases – Voiding Sailings

General rate increases, peak season surcharge filings and the cancellations of sailings – what to expect on or before January 1st and beyond.

The ink was still wet on  2019-20 Service Contracts when  Trans-Pacific carriers filed General Rate Increases of around $ 1,000/FEU ,  and Peak Season Surcharge increases of up to $ 800/FEU

The implementation dates of these huge increases of base rates and surcharges were postponed  as quickly and regularly as they were filed. Nonetheless, announcements of General Rate Increases  and Peak Season Surcharges increases have continued. The carriers’ rationale for these actions is not immediately apparent, but most likely is driven by their hope that low (spot) rates can be increased any time should container volume increase in the near future.

The voiding of sailings  can become a rather serious “weapon” for carriers as they attempt to  increase existing  rate and surcharge levels.

Withdrawing vessels from service  (voiding) has been justified by significant dips in cargo volume.  Some vessels may also have to be withdrawn from service for short periods of time  to be fitted with scrubber.  But  in October and  gain in November Trans-Pacific carriers  have/will void more than 35 sailings , and cancelled some weekly services from Central and South China to East Coast ports. Clearly, service suspensions and voiding sailings of this magnitude will make it easier for Trans-Pacific  carriers to pass on all or part of the  expected bunker cost increases to their customers and to raise spot rates – and eventually 2020-21 contract rates.

As important  as transportation cost increases are, please pay close attention to the  “ripple effect” the voiding of a  sailing and sailing cancellations by one carrier has on all other members of the same vessel sharing alliance, because their vessel space allocations are equally effected.