Peak season prediction gets the surcharge machine moving
Never slow to seize a revenue-gathering opportunity, transpacific carriers expecting cargo to build through the summer were swift to slap down the peak levy.
Consumers in the US have been spending steadily and once the National Retail Federation issued its Global Port Tracker report on Monday detailing how container imports at the country’s ports will increase through the summer, it took just 24 hours before the first peak season surcharge announcement hit the market.
Member lines of the Transpacific Stabilisation Agreement want a hefty peak season surcharge (PSS) of US$600 per FEU from June 10 to cover any costs from a possible surge in cargo.
With shipping lines trying to come back from a year of losses, they are pushing hard to lock shippers in at higher rates for the next 12 months. However, we understand that many annual contracts on the Shanghai-LA route have not been signed as US shippers try to get a better picture of consumer spending.
The NRF based their positive summer imports report on an increase in containers through the major gateway ports that appear to reflect retailers stocking up on back-to-school goods. Shipping lines say this is confirmed by forward bookings.
But will the PSS of $600 per box stick? The May 1 general rates increases have not been achieved so it is hard to say whether shippers will accept this latest surcharge.
What is clear is that shippers could find themselves facing space shortages again if there is a cargo surge. The TSA reckons ship utilization is at 95 percent already, which doesn’t leave much room for a rapid rise in orders.
Balancing ship supply to demand has always been tricky, but throw in unpredictable spikes in cargo and the transpacific quickly becomes a mess.
With vessel utilization so high, shippers may have no choice but to pay the PSS and maybe higher contract rates to ensure that when the cargo rolling begins, their boxes will stay on board.
* And in other news, the transport and logistics industry in Hong Kong has cracked open the bubbly at the news that Secretary for Housing and Transport Eva Cheng is quitting “for family reasons”.
During her five-year term, Cheng has been entirely preoccupied with the housing part of her portfolio and cheerleading unnecessary and profligate construction projects while critical transport and maritime issues have received scant attention.
The high costs associated with trucking containers across the border from China directly affect the competitiveness of Hong Kong port but little has been done to address this. Once a direct export megaport, Hong Kong is steadily relinquishing its gateway role and becoming just another transshipment port.
As a McKinsey study said last year: “The key to restoring Hong Kong’s competitiveness lies in addressing the logistics of getting goods to port, not the operation of the port itself.”
Fortunately, there wasn’t much room for the diminutive Cheng in the incoming administration, anyway. New chief executive CY Leung is putting the transport portfolio under one of the deputy secretaries and calling it the Transport and Works Bureau.
Still no Transport Ministry, but at least one of Hong Kong’s so-called “pillar” industries has been debundled from the infernal and chronically mismanaged housing sector.