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  • Writer's pictureStephen Fodor

Importers face massive hike in ocean contract costs

February 3, 2021

(American Shipper) Remember when people thought container shipping spot rates would peak around Chinese Golden Week last October? They weren’t even close. Then they thought year-end. Wrong again. Then they pointed to Chinese New Year, which starts next week.

That’s not going to happen either. Spot rates remain stratospheric. California port congestion keeps breaking records (there were 40 container ships at anchor in San Pedro Bay on Monday — a fresh all-time high). Liners are canceling voyages this month due to the port crunch, pushing even more volume to the months after Chinese New Year.

It now appears spot rates will remain strong all the way through the second quarter. They may ebb from current highs, but they almost certainly won’t crash.

This is exactly the scenario U.S. importers feared. They will have to negotiate their annual contracts — which generally expire by May 1 — in the midst of a spot-rate boom.

“The spot market has been insane … [and] timing is in carriers’ favor to negotiate contract rates, because spot rates are so high,” said Nerijus Poskus, Flexport’s global head of ocean freight, during a webinar presented by Flexport last week.

“The industry experts and veterans we talk with think that the first half might be a squeeze for the entire period,” said Patrik Berglund, CEO of Xeneta, a company that collects and analyzes contract-rate data, during his company’s latest market presentation.

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