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Starting June 1st, 2023 Our warehouse fee will be $0.65/cubic foot per month

In effort to lower the warehouse storage fee during inflation, we have went narrow aisle racking.This construction took us four months but the project is finally completed. With narrow aisle racking, we are able to drop storage by 24%.We as partners will go through this inflation together.

Starting June 1st, 2023 Our warehouse fee will be $0.65/cubic foot per month

In effort to lower the warehouse storage fee during inflation, we have went narrow aisle racking.This construction took us four months but the project is finally completed. With narrow aisle racking, we are able to drop storage by 24%.We as partners will go through this inflation together.

Blogs/hot-news

03/21/2023

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Trans-Pacific Container Shipping Contract Negotiations Reach Pivotal Moment

    Trans-Pacific Container Shipping Contract Negotiations Reach Pivotal Moment

    Next two weeks ‘crucial’ for freight pricing in US import market

    Container line conundrum: Spot rates are below where lines are willing to sign contract rates (Photo: Shutterstock)

    Final Stretch for Trans-Pacific Shipping Contract Season

    The annual contract season on the trans-Pacific shipping market is nearing its conclusion. Costs associated with U.S. imports, liner profitability, and service dependability all hinge on where contract prices settle in the coming weeks.

    Prior High Contract Rates and Sinking Spot Rates

    The twist this year is that the previous round of annual contracts were signed at historically high levels, and the current contract RFP season coincides with a period of declining spot rates.

    Weak Import Demand Amid Bloated Inventories

    Due to excessive inventories, import demand remains weak, with inbound volumes resembling spring 2020 levels when COVID lockdowns were to blame.

    Capacity Cuts Risk and Spot Rate Increases

    If shipping lines cannot secure sufficient contract business at cost-covering rates during the 2023 contract RFP season due to weak demand and falling spot rates, they could significantly reduce capacity in the trans-Pacific, similar to their actions in 2020. If shipping lines reduce capacity while import demand recovers in the second half due to dwindling inventories, spot rates would rise, and shippers with inexpensive annual contracts beginning on May 1 could see their cargo bumped by carriers prioritizing higher-paying spot containers, a situation similar to three years ago.

    Flexport Addresses 2023 Trans-Pacific RFP Season Complexities

    In a recent presentation, digital freight forwarder Flexport discussed the complexities of the 2023 trans-Pacific RFP season. FreightWaves conducted an interview with Nerijus Poskus, vice president of ocean strategy and carrier development at Flexport, to gain additional insight. Poskus asserts that most fixed contracts must be finalized by the first week of April, and he anticipates that Flexport will sign soon.

    Predictions on Trans-Pacific Contract Rates

    Anders Schulze, global head of ocean for Flexport, forecasts that trans-Pacific contract rates will be approximately 70% lower than 2022 base contract rates (excluding premium surcharges) and will settle around 30% above current floating levels. Schulze stated that current spot rates are unsustainable because charter rates and bunker costs are higher than they were before the pandemic.

    Final Outcome of Rate Negotiations

    Large beneficial cargo owners (BCOs) are signing carrier-proposed rates that are higher than the spot market, according to Poskus. He emphasized the significance of the next two weeks, as the final outcome of rate negotiations will not be known until April. Poskus anticipates that contract rates will exceed spot rates by $300 to $500 per forty-foot equivalent unit.

    Pandemic's Impact and Inventory Glut

    The pandemic triggered unheard-of market dynamics in container shipping, resulting in a significant increase in imports of consumer goods. As the current contract RFP season nears its conclusion, the aftermath of the COVID-era buying frenzy is a collision between declining spot rates and high prior-year contract rates. The surge in spot rates in 2021-2022 and the collapse in service reliability prompted U.S. importers to sign annual contracts at exorbitantly high rates and import far more cargo than necessary in 2022, resulting in a significant "bullwhip effect" that has inflated inventories in 2023. 62% of shipper attendees, according to a recent poll by Flexport, reported having too much inventory, a figure nearly identical to that of December's poll, which indicated 62%.

    Trans-Pacific Spot Rates Falling Amid Excess Inventories

    Trans-Pacific spot rates continue to decline as a result of excess inventory. Carriers have already reduced capacity, but not enough to offset the decline in import demand caused by an abundance of supplies.

    Freightos Baltic Daily Index Trans-Pacific Spot Assessments

    Freightos Baltic Daily Index (FBX) trans-Pacific spot prices continue to fall. The Asia-West Coast rate set by the FBX on Friday was $1,017 per FEU, a new post-pandemic low. Assessments for FBX Asia-West Coast are down 20% month over month, 26% year to date, and 94% year over year. On Friday, FBX Asia-East Coast spot rates reached $2,129 per FEU, representing a decrease of 16% month-over-month, 26% year-to-date, and 88% year-over-year.

    a chart showing trans-Pacific spot rates; current spot rates are negatively affecting contract rates

    Spot assessment in USD per FEU. Blue line: China-West Coast. Green line: China-East Coast (Chart: FreightWaves SONAR)

    Worst-Case Scenario for Shipping Lines

    The annual trans-Pacific contract season coincided with falling spot rates, which was the worst-case scenario for shipping lines. Signing annual commitments at current spot prices is economically infeasible for ocean carriers.

    Zim's Stance on Contract Rate Reductions

    The CFO of the ocean carrier Zim (NYSE: ZIM), Xavier Destriau, stated that while they understand shippers' demand for significant contract rate reductions compared to last year, they have established a floor limit. If Zim does not receive the rates they deem reasonable, they will cease sailing, which could have a significant impact on their customers' supply chains.

    Spot Rates Expected to Stabilize in Second Half

    Imports are expected to rise in the second half as inventories decline, resulting in a traditional peak season and stable spot rates. Due to the savings on the spot market during the first half of the year, some importers are willing to accept future spot risk and avoid 2023 contracts.

    Shippers Prioritizing Cost Management

    Kaitlyn Glancy, vice president of North America for Flexport, stated that many clients are playing the spot market and effectively managing costs. Despite the possibility that spot rates will rise in the second half of the year, some clients' top priorities are cost management and margin expansion.

    Risks for Shippers Securing Low Contract Rates

    Shippers who secure low contract rates for May 2023 through April 2024 face risks in the second half of the year if carriers implement significantly larger capacity reductions. Poskus predicts that contract rates will be marginally higher than spot rates at the start of the contract period, with spot rates increasing to reach parity with contract rates in the second half.

    Possible Scenario: Spot Rates Jump Higher Than Fixed Contracts

    Poskus cautioned that if carriers withdraw an excessive amount of capacity, spot rates could rise above those of fixed contracts, jeopardizing allocations under fixed contracts. In this scenario, service reliability would suffer, so it would be in everyone's best interest for shipping lines to generate a small profit in order to maintain service levels.

    The Importance of Loading Priority

    Poskus emphasized that paying slightly higher contract rates can significantly alter loading priority, thereby enhancing service levels without significantly increasing costs.

     

     

    MintN

    Mint Nguyen

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