Global and Domestic Transportation Rate Increase Announcements Begin Along with the Many Implications
Transportation, procurement and product management teams who are frequent readers of this blog are probably not surprised by the various global transportation rate hikes that have been announced these past days. More are sure to come as outlined in our previous Supply Chain Matters commentary regarding requested rate increases.
Industry leading ocean container Maersk Line announced rate hikes on the majority of major global routes effective in early July. These rate increases involve global trade between:
- North Europe to and from the Unites States and Canada in the amount of $200 per dry container, effective July 1, 2013.
- Middle East, India & Pakistan to United States and Canada trade lane with an effective date of July 3, 2013. The rate increases amount to $300 for a 20 foot container, $400 per 40 foot standard container.
- Far East to the Mediterranean, excluding Portugal and Syria, with an increase of $400 per 20-foot container and $800 per 40-foot and 45-foot high-cube container effective July 1, 2013.
- Far East to Portugal, the hike will be $950 per 20-foot container and $1,900 per 40-foot and 45-foot high-cube container.
- Far East to Syria, the increase will be €310 (about US$413) per 20-foot container and $826 per 40-foot and 45-foot high-cube container.
- Middle East to the United States and Canada, an increase of $300 per 20 foot container, $400 per 40 foot standard container effective July 3, 2013.
In the same vein, French based CMA CGM announced a “revenue restoration program” on its Asia-Europe and Asia- U.S. trade lane. The company indicated it will impose a general rate increase on July 1 of $150 per 20-foot container and $200 per 40-foot container from North Europe (defined as North Continent, Scandinavia, Baltic, and the United Kingdom) to the Far East (defined as China, Japan, Korea, and Southeast Asia countries). Rate increases to U.S. West, Gulf and East Coast ports from all ports in Asia range from $320 to upwards of $675 per container.
FedEx’s Freight division announced that it will increase shipping rates by an average of 4.5 percent effective July 1. This rate increase applies to FedEx Freight shipments within the U.S., between the U.S. and Canada or Mexico. The affected shipments are covered by the FXF 1000, FXF 501 and other related series base rates. The existing fuel surcharge will remain unchanged although this provider is quick to claim that the fuel surcharges of the next six largest LTL carriers are at least 29 percent lower than FedEx’s fuel surcharge rate. Readers will recall that FedEx announced rate increases for its FedEx Express and FedEx Ground shipments in early January.
For European based manufacturers who are still struggling with the effects of 6 quarters of economic recession and striving to sell into broader geographic markets, the ocean container increases are obviously ill-timed. Manufacturers who are taking advantage of increased sourcing within the United States will probably not be pleased with these new rounds of surface freight increases in the light of a fragile recovery.
The bottom line is what Supply Chain Matters has previously declared, that multiple shifting forces are impacting global transportation. The current economic crisis that has severely impacted Eurozone markets and the building momentum toward near shoring occurring in some industries are impacting current shipping volumes and rates. Longer term, more sophisticated shippers with better planning capabilities and leveraged use of advanced technology have discovered means to rely on more economical or more flexible modes of transport. The global transportation industry is in the midst of a structural change and wants shippers to pony-up for hemorrhaging balance sheets.
As noted previously, the decline in ocean container transport rates in the past six months has been three times as fast as in 2011. Whether these new rates will stick is solely dependent on the bargaining power and leverage of large volume shippers who have the where-with-all to negotiate from strength. However, small and medium sized shippers must fend with the market or align with the scale and negotiating power of a 3PL.
The takeaway of this and other related commentaries remain the same. Procurement, supply chain and product management teams are to not at all assume business-as-usual in short and longer-term transportation strategy and contracting. Do your homework, stay informed of continuing industry shifts and implications. Select your transportation and logistics partners wisely, those that can fulfill both today’s and tomorrow’s business needs, and those that will survive the current environment of industry turmoil.
Consolidation and transportation industry re-structuring forces are at-hand and the rules of Darwin will take hold. This is a time to have trusted partners.