Freight rates are set off ahead of schedule during the peak season, and cargo owners angrily criticize shipping companies

As the demand for transportation on Asia-Europe and trans-Pacific routes continues to heat up, the global container shipping market is showing the characteristics of early arrival of the peak season. However, while spot freight rates are rising rapidly, many cargo owners have reported that some liner companies have begun to reduce the supply of space for long-term contract customers and charge high premiums for cargo exceeding the contracted quantity. This move has caused widespread dissatisfaction in the industry.

A cargo owner told industry media that the current market heat has increased significantly. Shipping companies are taking advantage of the tension between supply and demand to push up freight rates, and the contract space of many long-term partners has been compressed. The cargo owner pointed out that in addition to rising freight rates, continued tensions in the Middle East have intensified expectations of rising fuel prices, further prompting the supply chain to take early action. Some Chinese manufacturing companies have begun to urge overseas buyers to take delivery of goods in advance to avoid the risk of possible future increases in production and transportation costs. This is also one of the important factors for the early start of the peak season.

At the same time, the head of shipping for a large European retail company severely criticized the practices of some shipping companies during an interview. He said the recent treatment of long-term contract customers by some carriers was "unacceptable." "Once the market improves, they will go back to their old ways and try to get as much revenue from the market as possible." The person in charge revealed that the company's current freight demand is significantly higher than expected, and bookings continue to increase. However, some shipping companies require customers to pay for additional space at higher market rates on the grounds that "contract quotas have been exhausted."

"We proactively communicated with various shipping companies, hoping to gain support, but some shipping companies directly stated that if additional space is needed, they must pay at a higher market price." The person in charge believes that this is not the first time that this situation has occurred in the shipping industry. "If the situation in the Gulf region eases in the future and the market regains balance, shipping companies will take the initiative to compete for cargo volume. But now, they have once again chosen to take advantage of market tensions to increase profits." He revealed that in the past week alone, one shipping company unilaterally cut its contract space quota by about 10%. "We have had serious communication with the senior management of the shipping company and made it clear that this practice is unacceptable, but similar situations still happen again."

Peter Sand, chief analyst at Xeneta, a freight market analysis agency, pointed out that due to geopolitical conflicts, many shippers have postponed the signing of long-term transportation contracts in the past few months, hoping to lock in prices after the market stabilizes. However, the reality is exactly the opposite. "This crisis has lasted far longer than market expectations, and freight rates have increased much more than expected. Current geopolitical risks still exist, and it is difficult for shippers to make up for the previous increase in transportation costs through operations in the second half of the year." Sander believes that the current core issue for shippers is no longer whether to sign a long-term contract, but how to minimize the impact of geopolitical risks on the full-year logistics budget.

According to Xeneta's data as of early June, spot freight rates from the Far East to the U.S. West Coast have increased by more than 80% compared with the end of February, to the U.S. East Coast by about 70%, to Northern Europe by about 44%, and to the Mediterranean by about 40%. In the face of a continuing rising market, Sander advises shippers to lock in long-term contract rates as soon as possible to reduce the risk of further increases in the future. "Some companies originally hoped that with the gradual recovery of supply chains in the Red Sea and the Middle East, the spot market would fall back, so they delayed signing long-term contracts. But this strategy cannot continue indefinitely." He pointed out that even if the new long-term contract price is higher than the budget at the beginning of the year, it may be more cost-effective than continuing to be exposed to spot market fluctuations.

Despite signing long-term transportation contracts, many cargo owners find that the contracts do not fully protect them. The person in charge of the above-mentioned European retail company said that the shipping space within the current contract scope can still be executed at the agreed price, but all additional cargo volume will need to pay additional fees. "Although the increase is not out of control, you still need to pay an additional US0 to US,000 per container, which is still a considerable cost." He said bluntly: "This is almost a disguised price hike. Once the market improves, some shipping companies always seem to have difficulty restraining the urge to increase prices."

Sander warned that in the current market environment, it is difficult for both cargo owners and freight forwarders to completely avoid the impact of market fluctuations. He recalled that at the beginning of the year, there was widespread concern in the market that the return of shipping capacity after the resumption of the Red Sea route would lead to a collapse in freight rates. However, it turns out that as uncertainty in the supply chain persists, a large number of shippers are willing to pay higher freight rates to ensure the stability of the supply chain, which also provides support for shipping companies to continue to push up freight rates. Under the combined influence of geopolitical risks, capacity management and early peak season demand, the global container shipping market may continue to operate at a high level in the coming months, and the pressure on freight rates will still be difficult to significantly alleviate in the short term.