4/1/2010
2010 Tide of Sea Freight Prices Rises Again April 1 – Increasing Fastener Costs

Shipping container started going up in January, new charges are being added today and annual contracts for container costs expected to go up May 1.

J.P. Park, director of purchasing for XL Screw, said the result is the price of imported fasteners to North America is likely to climb 3% to 5% due to ocean freight charges.

• Transpacific freight jumped $320 per $20 ft. container January 15, 2010, due to an “Emergency Revenue Charge.”

In addition there have been increases such as higher Bunker Charge, In-Land Fuel Surcharge and extension by some carriers of the peak season surcharge through the traditionally non-peak season of September to April.

• Effective April 1 there will be a general rate increase of $240 for 20′ containers / $300 for 40′ on dry and WC local reefer cargo; and more on other categories. Also the documentation fee doubles to $50.

• The Transpacific Shippers Association is seeking A $640/20′ ($800/40′) increase May 1 when new freight contracts become effective.

Barry Porteous of Porteous Fastener Co. said the increases result from major carriers losing money. The ships are traveling at slow speed to save fuel and making more stops. Some steamship lines are taking ships offline.
They are delaying cargo on the docks even for major Big Box customers, Porteous noted.

One problem for the fastener industry is that a container of fasteners is not a profitable as one filled with consumer products such as televisions, Porteous pointed out.

Beyond price, Park noted that “as a result of capacity reduction by carriers through reduction of their fleets and sailing schedule, getting container space has been more difficult and many shipments are delayed from overseas.”

Even exporters are struggling to find container space, Park added.

“Steamship lines are taking full advantage of the shortage of container space to increase rates,” Park finds.

European Prices Up Weekly

• For Europe, Fastener + Fixing editor Phil Matten reports “there are increases coming through virtually week to week.”

A problem with this round of increases is they “are not going to be smooth. The reality is demand is not really ramping up and there is still a lot of uncertainty over its sustainability,” Matten explained. “Inventory levels have been pulled down hard whether in fastener stockists or raw materials in the factories.”

“On the other hand there is a lot of mothballed capacity on the supply side – iron ore and nickel mining for example, steel mills, container ships laid up, as well as the fastener factories themselves. To my mind that means a lot of unpredictability facing the sourcing guys.”

“Container rates have been pushing up rapidly as carriers slash capacity in response to economic conditions,” Matten reported. “The trend appears set to continue according to Danske Bank’s container rate index, which indicates that Asia-Europe container spot rates will hit U.$2,000 soon.”

“Shipping companies are still fighting to contain losses as Maersk’s recently released results, recording a US$2.09 billion loss, amply demonstrate,” Matten pointed out.

The story is more than just cutting capacity “but also, it appears, fundamentally changing approaches to container shipping,” Matten observed. “Maersk, amongst other carriers, has laid up some of its fastest container vessels and adopted ‘slow steaming’ – dramatic reductions in speed to achieve economies in fuel consumption.”

The implication is slower transit times, which combined with routing that now appears involve increased stops on the way, implies an impact on lead times from Asian factories.”

Will the prices stick?

“Although some steamship lines have slowly started to increase vessels, they are very slow to react to the need of more vessels and sailing schedules to keep pressure on demand,” Park told GlobalFastenerNews.com. “As long as a space shortage problem continues, this proposed rate increase by TSA will stick. I do not expect shipping lines will bring back many more fleets into service until new ocean freight contract negotiation is finalized.”

Shippers Speak

In December the Transpacific Shippers Association announced the “emergency revenue program” for the first half of 2010 until the contracting season in May 2010. With all major transpacific carriers reporting losses totaling an estimated US$20 billion collectively for 2009, the shipping lines said they could not wait for 2010-11 contracts.

Evergreen Marine Corp. president Jack Yen described the emergency revenue “as a bridge to get carriers through the first half of 2010, recognizing that the current rate levels do not adequately cover the cost of operating assets in this trade.”

“The transpacific customer base relies heavily on the container transport infrastructure to provide reliable, time-sensitive, value-added supply chain services,” Yen said. “As an industry, we’re sending out an SOS to the shipping community with this emergency charge.”

TSA members also pointed to an 81% increase in marine fuel prices during 2009 – adding more than $520,000 to the cost of a single Asia-U.S. sailing to the West Coast, and nearly $720,000 to a single East Coast all-water sailing.

And in a related move, TSA said it will amend its agreement on file with the U.S. Federal Maritime Commission to provide members with additional authority to discuss slow steaming or other environmental initiatives to reduce emissions while cutting operating costs. Web: tsacarriers.org
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