Peak Season Surcharge Postponement Update 6-22-16

| Jun 21, 2016 2:21PM EDT  joc.com

In an exercise that is likely to be repeated in the weeks ahead by other container lines, CMA CGM notified its customers that a previously announced peak-season surcharge in the eastbound trans-Pacific that was scheduled to take effect on July 1 has been postponed until July 15.

The customer advisory listed the proposed peak-season surcharges as $360 per 20-foot-equivalent unit, $400 per 40-foot-equivalent unit, $450 per 40-foot high cube, $450 per 40-foot refrigerated container, $510 per 45-foot container and $640 per 53-foot container. The surcharge would apply to most origin points in Asia to all U.S. ports.

Hapag-Lloyd announced earlier this month that it was delaying implementation of its proposed peak-season surcharges from June 15 to July 1 on routes from East Asia to the U.S. and Canada. Hapag-Lloyd’s customer advisory listed the proposed surcharges as $320 per TEU and $400 per FEU.

Carriers must provide at least 30-days advance notice for rate increases. As the U.S. import trade from Asia begins to transition to the busy summer-fall peak season, carriers usually test the waters with an early-summer surcharge announcement. In recent years, with so much over-capacity in the trans-Pacific, the early peak-season surcharges have not stuck.

Carriers will then postpone the early surcharges and announce new dates 30-days out. Eventually, when supply-demand is more in balance, carriers begin to capture a percentage of the surcharge, but usually not the full increase. However, as the season progresses and vessels become over-booked, carriers are usually able to retain a higher percentage of the surcharge, especially from smaller importers and NVOs.

Trans-Pacific carriers are working to make rate increases stick by cutting capacity. China Cosco Shipping, the Ocean Three and the G6 Alliance have all cut services, resulting in a 1 percent drop in trans-Pacific capacity equal to 16,000 TEUs, according to Alphaliner.

In recent years, August has been the busiest month of the year for West Coast ports, with another cargo surge coming in October. September is usually busy for East Coast ports, although volumes there tend to be more consistent during the summer and fall months because of capacity constraints at the Panama Canal.

This summer will usher in a new capacity environment with the opening at the end of this week of the third set of locks at the canal. Vessel sizes initially will probably double from about 4,500 TEUs today to ships of 8,000 TEUs to 10,000 TEUs. However, it will take some weeks for carriers to test the new locks and phase in their rotations.

Total U.S. import growth in 2016 is still very much in question, with the Global Port Tracker predicting minimal growth of about 1 percent from 2015. However, IHS Senior Economist Mario Moreno projects 5.7 percent growth.
Contact Bill Mongelluzzo at bill.mongelluzzo@ihs.com and follow him on Twitter: @billmongelluzzo.

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