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The Merchant · n°126 · December 5, 2024

Shippers grapple with quickfire Trump threats

Figure of the week

51.5% The average on-time reliability rate of container ships worldwide in October, slightly improved month on month, but still at a very low level compared to pre-Covid levels, reveals Sea-Intelligence.

Quote of the week

“After Black Friday and as Christmas approaches, the first two weeks of December are shaping up to be busy in the air. Air freight rates and capacity fluctuate day by day from China.” Romain Jutan, air expert at OVRSEA.

Ocean: a sluggish rate rebound on Asia-Europe

In the new East-West configuration, one could have expected spot rates to rebound earlier at this year’s end. Yet they have tended to stagnate in recent weeks. Should we expect to see them rebound abruptly after the FAK rate increases announced for December 1? Yes, according to the latest SCFI (Shanghai Containerized Freight Index) indices, which gained between 500 and 600 USD/TEU in the latest reading. But market observers are divided: can these increases hold? Contrary to last year, average spot rates are high even before the pre-Chinese New Year peak season begins. Expert Lars Jensen believes strong demand in Europe is the cause. But while the market is robust, it is not explosive for all that. Without a more aggressive blank sailings strategy, the increase in spot rates by January could prove only moderate, other market players estimate.

Paradoxically, the rush is indeed there in Chinese ports. We can observe, for example, great difficulties in accessing capacity in Qingdao or Tianjin. From China, container ships are increasingly full in December, with the notable exception of MSC’s. “Containerized freight rates are still on track for a recovery in December,” estimates Linerlytica. At the same time, port congestion has eased everywhere in the world, dropping from 3 million TEU immobilized off the ports in October, to less than 2.1 million TEU (Linerlytica). A market fluidity factor rather favorable to shippers.

United States: Trump threatens the BRICS and will have to manage the East Coast dockers

Donald Trump’s victory has trained the spotlight on the American situation like never before. The latest declaration from the president-elect: the BRICS countries should expect a customs duty of 100% if they were to turn away from the dollar as an international trading currency. A new threat after those uttered against Canada, Mexico and China. And it is not trivial: the BRICS (originally Brazil, Russia, India, China and South Africa, to which are now added Egypt, Ethiopia, the United Arab Emirates and Iran) represented nearly 23% of US imports in 2022.

In parallel, Donald Trump must prepare to manage a new strike threat in the ports of the East Coast and the Gulf of Mexico. The ILA dockers’ union set the tone by reposting an aggressive banner on its Facebook page: “If it’s a fight they want, it’s a war they’ll get.” If its demands against the automation of gantry cranes are not heard, we could witness a new strike as early as January 15, a few days before the transfer of power at the White House. For now, Donald Trump nonetheless seems rather well regarded by the ILA… But the standoff is only just resuming.

In the meantime, the transpacific trade toward the United States remains quiet and stable. Spot rates continue their slow decline. American shippers seem to have rebuilt their stocks very far upstream this year, which reduces by that much the risk of seeing a strong peak season this month. As for the Transatlantic, from Europe, “capacity is becoming limited,” qualifies Louis Gas, ocean expert at OVRSEA. “The recent blank sailings of late November delayed shipments and December is already quite full.” One piece of advice: anticipate your bookings while you still can!

In the air, China-Europe rates go through a zone of turbulence

From the Asia-Pacific region, air freight activity has stabilized, according to WorldACD: tonnages as well as spot freight rates barely increased last week, although clearly up month on month. From Europe, tariffs on the other hand rebounded by 8%, and by 12% in North America. For WorldACD, this stabilization in Asia-Pacific, and in China in particular, should be qualified. It could stem from a capacity transfer (by cargo aircraft) from the transatlantic axis, with airlines “anticipating an increase in shipments coming mainly from China and Hong Kong toward Europe and North America,” according to the analysis firm.

We can therefore reasonably expect the market from Asia to overheat in the coming weeks. Because on the ground, the signals of the peak season are visible. Behind the apparent stability of the indices, real prices are undergoing very strong short-term volatility, especially in China, observes Romain Jutan, air expert at OVRSEA. This situation should persist until at least mid-December.

In Southeast Asia, the situation is improving in Bangladesh as well as in India. India is in the process of increasing its export volume toward Europe and the United States and this is good news. Beware finally if you import from Vietnam or Thailand, a year-end shipment rush is sharply reducing access to capacity. Rates are rising.

In brief, seats are becoming scarce between Paris and New York. The available air freight capacity between Paris CDG and JFK has sharply decreased. As a result, carriers are demanding a booking lead time of between 10 and 15 days. As Christmas approaches, passengers’ luggage takes priority, which limits the possibilities even more. Note that American Airlines removed its direct CDG–JFK flight from December 6 to 19. Anticipate!

Here is what you will pay to help shipping lines decarbonize

Hapag-Lloyd, Maersk or CMA CGM have admitted that their customers in the European Union will pay more surcharges linked to carbon emissions in 2025. And for good reason, the surcharges applied to maritime transport under the European emissions trading system (ETS in English) will increase next year. To this will be added the extra costs of the FuelEU Maritime regulations. But what should we expect on the bill? On the Maersk side, the surcharge should go from 36 USD/FEU to 99 USD/FEU, according to Lars Jensen. At ONE, an EES (Europe Environment Surcharge) including ETS and FuelEU, would come to 88 USD/FEU on an Asia-Europe shipment.

🔎 To go further, discover the Hapag-Lloyd press release

👋 See you next week, The Merchant team

Sources

Go further

How much does a freight forwarder cost, and how to avoid hidden fees? → How to import from China to Europe, step by step → BAF, GRI, demurrage: how to read the surcharges on your freight invoice →

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