The equipment crisis in India has reached a new peak. Specifically for inland points, there is an acute shortage of containers to load at any rate level. There is also a severe supply and demand imbalance, and this is expected to continue through at least April. The following are a few significant trends surfacing in the India market.
- MSC is the carrier that has been hit the hardest—they have tried their best to honor named account contracts, as late in the hour as they could, barring bunker and some peak season surcharges. However, today we received news from them stating that they will impose a $1000 peak season surcharge to all containers gated in after March 23, 2021. This surcharge is only applicable to named account rate-contracts and not to spot rates and is designed to bring named accounts closer to the spot rate market. They may be doing this for the following reasons,
- Normalize named accounts before they begin negotiating for 2021 to secure higher fixed rate deals for 2021-22.
- Prioritize equipment for their named customers.
- Charge more because they can—since most of the minimum quantity commitments (MQCs) for 2021-21 are met with 35 days to go into the new contract season.
- Hapag Lloyd and CMA have already begun negotiating for 2021 with Non-Vessel-Operating Common Carriers (NVOCCs). Right now, NVOCCs are negotiating rates at around $4,000 to U.S. base ports. This is about twice as much as last year, but below the current spot rate market, which hovers above $5,000. There will be a lot of pressure on ocean liners to accommodate their Chinese supply chains this year, which may cause pressure on Indian prices.
- India to the U.S. West Coast, will be guided entirely by discussions around the transpacific trade lane. With close to 30 vessels searching for anchor around LA/Long Beach and Oakland, we are still weeks away from any viable discussion.
Overall, ocean liners are claiming 2021 to be a year of equipment shortage and we are finding that this gives them the necessary leverage to negotiate at higher levels.
Three trends are emerging for 2021 fixed rate contracts:
- Customers who move less than 500 TEUs, may not receive favorable deals, as they might have last year.
- Customers are advised to keep at least 40% of their total annual volume outside of their fixed deals and are subject to market conditions.
- Steamship lines are asking customers to provide granular volume commitments, by the week, to secure containers—an annual projection may not be enough.
Need assistance with negotiating the India trade lane? Or have questions about these updates? Schedule a call with Shaun.