Rising Ocean Freight Prices From China

Though 2011 turned out to be a good year for China purchasers who use ocean freight for their shipping, experiencing low costs in this area, 2012 is looking to have rates on the rise again which should put those who rely on ocean freight increasingly on the defensive.

Falling Rates in 2011

2011 saw a relatively dramatic drop in shipping rates as many shipping companies experienced losses. Total losses for the global shipping industry reached US $5.2 billion. One of the main reasons for falling rates on imports was over capacity. Overall, a higher supply and lower demand left an extremely competitive environment among international ocean carriers who found themselves having to drastically cut rates on many of their shipping-lanes in order to remain competitive. This got so bad in fact, with the demand so low, that some freight companies were even found to be paying clients to let them ship their goods.

Rising Rates Already Started in 2012

Many in the international shipping industry will see ocean rates on both 20 and 40-foot containers go up in 2012. Maersk Line for example, the world’s largest container ship and supply vessel operator, already has increased its freight prices on its Asia-Europe lines as of the beginning of March with 20’ containers seeing a rise of US $775.

Other shippers are following Maersk’s lead. Hapag Lloyd, another major player, has decided to start charging peak season surcharges on containers travelling from Asia to the U.S. Most carriers have started 2012 adding on either Peak Season Surcharges (PSS) or applying General Rate Increases (GRI). Some carriers have even already imposed or plan on imposing both for 2012.

These are not the only big names to have made these moves. Evergreen Line has announced that they will raise their freight rate by US $600 in March and again by US $300 in April. COSCO will raise prices by US $300 in March in addition to adding a US $227 Bunker Adjustment Surcharge to their prices.

On March 8th, 2012, The People’s Daily reported on some of these steep price increases as, for example, the cost of transporting ocean freight from Shanghai to Rotterdam, in the Netherlands, reached a price of US $2,732 per container, which was a growth of 114% week-over-week. Another example is the sea-lane linking Shanghai to Genoa, Italy, on which the price of ocean freight shipping rose to US $2,272 per container, a growth of nearly 60% from US $1,422 a week earlier.
Japan-based Nippon Yusen Kabushiki Kaisha (NYK Line) and Israel-based ZIM Integrated Shipping Services Ltd. also recently announced that their prices would go up from April 1.

With Chinese manufacturing slowing down along with the lessening of the overall growth rate of its economy, it will be interesting to see how Chinese exporters and the central government help to maintain the sectors’ strength in the midst of these rising prices. In addition, it will be even more important for China buyers to find additional and more creative ways to save on their shipping costs and elsewhere in their supply chain.

We’d love to hear from you now: How will the rising shipping rates affect you? How will you deal with the rise in costs to your China buying program?