Trans Pacific Import Ocean Freight Pricing 2021
Spring 2020 a new concept started to be introduced in the ocean cargo business. It is called “premium” pricing. Started as a “pay to play” type scenario allowing business cargo owners to pay a reasonable stipend in order to get a better guarantee that their shipment will make the booking in place and actually be loaded to vessel. On the other side of this scenario, if you choose to go with the normal process, your shipment could very well get bumped by the premium folks.
Forward 14 months. Today, the main option is premium. To even get space on a vessel, a paying customer has to accept higher pricing (in most cases updated every two weeks) however, they also have to have good forecasting to book 4-6 weeks in advance because every single vessel is full.
Wait…Did you just read that? 4-6 weeks in advance but pricing is only good for two weeks (1 to14th and 15th to 30th cycles). How can one even navigate such a scenario. The price of a container is decided upon “gate-in” to the terminal.
The below example shows the disconnect. Book today , 21JUN2021 for 05AUG vessel space. The current premium pricing secured for USD$ 9,500.00. However, the price you will pay is not locked in. Your price is calculated at gate in, let’s say 06AUG which is subject to any GRI(s) added for the next 3 pricing cycles. Those rates are not yet available for making business decisions. Cost-of-Goods-Sold math cannot be calculated until the gate in date.
And we are not talking USD100-300 hike, it has resulted in USD1000s difference depending on the lane and the timing. A recent booking went from $8,600.00 to $13,500 in two weeks because it was in the Yantian Port of call rotation.
Additionally, there is a concept called “Dead Freight.” Going back to the schooner days, if you rented a vessel to move cargo, then found out your order wasn’t ready. The Captain /owner of such vessel had a right to charge you for non-use of the vessel. After all he has lost revenue. Today this is charged in two common ways: If your LCL freight is not stackable, a consolidator will charge you dead freight fees on the cbm volume of space above your crate that cannot be used. Second scenario is related to missing a premium booking gate in…if you don’t end up shipping your container, the carriers (each carrier is different) has the right to charge you for the lost revenue. Currently averaging about USD$1000.00 for a missed booking.
Locking in a rate is very hard to get done in the current climate. Big players like Walmart, Target and Home Depot have been feeling the pain as well; if not directly, through their suppliers. Home Depot leased a dedicated ocean vessel last week that will simply go back and forth in the Trans Pacific lane.
Most forecasts say this will run into 2022.
Best advice is to plan ahead and budget for a higher rate when it gates in.