Shipping companies raise rates for great start

21 December 2023

Sea-freight rates, compared to previous months, are subject to a slight increase. And if initial reports on this are to be believed, rates will be hiked further from January. There are also fears of a sharp drop in vessel capacity due to the cancellation of sailings. All this is meant to compensate for a deteriorating supply-demand balance. How will this affect you as shipper?

Financially very disappointing 2023

You probably noticed in the last quotations of 2023 that sea-freight rates are rising again. Of course, this has to do with the usual rush around the holidays and the upcoming Chinese New Year. But there is an even bigger reason for shipping companies to raise rates. It is a direct response to a very disappointing financial year.

So for the market, which has been struggling with far too much supply and very little demand for a year, this culminated in financial drama. What’s more, costs for shipping company are still very high. Spending on fuel oil, the purchase and maintenance of scrubbers and the agreed rates for time-charter contracts that were concluded in 2021 and 2022 at expensive levels, make it difficult for them to cut their spending. How will shipping companies turn the tide in the new year?

Fleet expansion gives shipping companies headaches

Compared to 2022 and 2019, the fleet grew on average by 5% and 19%, respectively. On the other hand, container volumes are down 2% compared to 2022 and are only 1% higher than in 2019.

The cargo supply is simply not there at the moment. Costs, on the other hand, have increased enormously. By 2024, the fleet is likely to grow by another 9%. This is causing further pressure on the market and has prompted shipping companies to take action.

Blank sailings & price hikes for a solid start to 2024

To start with, spot rates will be tackled with an increase of as much as 15%. But regular sea-freight rates will not be left behind either. Both Hapag-Lloyd and CMA CGM have announced sharp increases in their FAK (freight all kinds) rates from 1 January.

There is even talk of doubling the rate of a 40ft container. Starting with services from Asia to Europe. Shortly afterwards, rates in the Mediterranean and on Transatlantic services will also be increased. Presumably, other carriers will follow suit in the coming weeks.

The market is already experiencing difficulties booking cargo for shipments in late December and early January (i.e. well before Chinese New Year). It seems that this already marks the start of the annual period of blank sailings. Analysts are predicting that this will rise in early January to some 40% fewer scheduled sailings from China.

Analysts predict that by early January this could add up to the loss of at least some 40% of scheduled sailings from China. Unfortunately, the current, unsafe situation in and around the Red Sea will not make this any easier. Many shipping companies are forced to change their shipping routes because the Suez Canal is not accessible. This is going to cause extra travel time and blank sailings.

Shippers are suffering from surcharges and shipping-company results

In addition to the rate hikes, in 2024 you will unfortunately face further challenges. We’ve already informed you that as per 1 January 2024, all shipping companies will be charged ETS taxes.

Recently, Hutchison ECT Terminals also joined the fray. As of 1 January, they will be implementing two of their own surcharges: the Climate & Distribution Surcharge. This will be charged for every visit to the terminal. Check out the fine print here.

Find out more?

Would you like to know more about the new surcharges or are you curious about other articles relating to the container market? Then take a look at our news archive. Naturally your Ritra contact person is always ready to advise and assist you.