Carriers Start 2016 with the First Successful Rate Increase in Nearly a Year

January 5, 2016
By Rich Roche

A container ship sits in the icy waters of a commercial port.

After allowing rates to slide for nine consecutive months, vessel operators on the Trans-Pacific trade have gone through with their announced plans to implement a large rate increase, effective January 1, 2016. Additionally they have announced plans to implement a Peak Season Surcharge (PSS) on January 15, followed by yet another General Rate Increase (GRI) on February 1.

At the time of publishing our 12/9 Client Alert, we anticipated that rates would bottom-out. We went from record highs to record lows within a year, causing carriers to band together in an attempt to regain a large piece of what they had given away. High demand for January sailings combined with vessel lay-ups for winter deployment created the perfect environment for this rate increase to go through.

While this is a case of history repeating itself (we encountered a similar situation in 2009), the economics driving these new rate levels may be fundamentally flawed. Capacity keeps growing with the delivery of ever-larger ships, while at the same time the global economic engine has cooled down a bit. Even sustained vessel lay-ups cannot prevent the light loads we anticipate once the rush for pre-Chinese New Year shipping has ended. We’re still predicting a downturn in rates before the end of the first quarter, followed by soft rates for the balance of the year.

We recommend that you plan for the worst case scenario of rates increasing to the announced levels listed below. Mohawk will monitor the market and work hard to mitigate the increase wherever possible.

Peak Season Surcharge

  • Applies to all U.S. and Canadian ports
  • Effective January 15, 2016
Equip. USD
20′ $320
40′ $400
40′ HC $450
45′ $506

General Rate Increase

  • Applies to all U.S. and Canadian ports
  • Effective February 1, 2016
Equip. USD
20′ $480
40′ $600
40′ HC $675
45′ $760

Rich Roche is Vice President of International Transportation for Mohawk Global Logistics. Click here to read more about Rich.

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