Higher Rates Ahead on Trans-Pacific Routes

8 January 2024•Article

Higher Rates, Capacity Squeeze and Equipment Shortages Ahead on Trans-Pacific Shipping Routes

Current disruptions in the global supply chain are prompting carriers to add surcharges, while reduced capacity due to equipment shortages is driving up rates on Trans-Pacific routes.

Global supply chains are currently shaken by significant disruptions caused by Red Sea security threats, with carriers continuously updating their voyage plans and taking new measures to counterbalance the effects. The Trans-Pacific Eastbound route from Asia to North America is feeling the impact, as carriers cancel long-term contracts with higher rates expected from mid-January as a result.

Longer ocean transit times are now impacting equipment and container management in Asia, causing equipment shortages and making fulfillment challenging, adding further delays to shipments. Equipment shortages are also likely to increase blank sailings, as carriers prioritize journeys according to available resources. Trans-Pacific rates are expected to increase as a result.

To prevent the effects of longer transit times and the anticipated slowdown as we approach the Chinese New Year, shippers are adjusting their strategies by moving goods earlier and putting upward pressure on demand. As a consequence, potential rate increases are expected from January 14th on journeys from Asia, with early indications ranging up to $2000 per container to the US West Coast and $3500 per container to the US East Coast and IPI.

Others have already began looking at changing their routings to avoid canals and reduce transit times by shipping into US West Coast ports for transloading (unpacking containers on US West Coast and shipping to onward destination by full trailer on road).

Shippers with existing longer-term contracts should also prepare for potential Peak Season Surcharges (PSS) from the second half of January until the Chinese New Year, ranging from $500 to $1000 per TEU.

On Trans-Pacific Eastbound and Westbound routes, but particularly the latter, carriers have imposed 'Force Majeure' in response to the Red Sea situation, meaning that they can implement additional charges on shippers with minimal notice, avoiding the standard 30 days' notice imposed by the Federal Maritime Commission. An example is ONE, which, as of January 2nd, introduced the Red Sea Diversion Surcharge (RDS) for all Trans-Pacific Westbound (North America to Asia) exports of around $200 per TEU to counterbalance the added costs of precautionary measures. Adding another layer of complexity is the Panama Canal drought, which led carriers to introduce surcharges from January, ranging from $15 to $170 per TEU for all containers moving to/from Asia via the Panama Canal.

We will continue to monitor the situation and minimize the effects on our clients as much as possible through our proactive restructuring of your supply chains through our global network. For any immediate questions, please contact us here.