Major companies impose peak season surcharges on some significant routes

By ZHONG NAN | China Daily | Updated: 2024-05-29 09:12

Following recent announcements by multiple global shipping companies about rising fees for container transportation, Chinese exporters have quickly adapted to these changes and anticipate this trend will continue into the third quarter.

Major players like France's CMA CGM Group, Germany's Hapag-Lloyd AG and Denmark's Maersk Line have all reported substantial rate increases, with some hikes reaching up to $2,000 and several routes experiencing over 50 percent rises. These adjustments span numerous routes connecting Asia with Europe, North America and South America.

For example, CMA CGM announced that starting May 15, the rate for a 20-foot equivalent unit (TEU) on the Asia to North Europe route would be adjusted to $2,700, and the rate for a 40-foot container (FEU) will increase to $5,000, which represent increases of $500 and $1,000, respectively, compared with rates implemented on May 1.

Maersk will impose a peak season surcharge on routes from Asia to the west coast of South America, Central America and the Caribbean from June 1. The surcharge will be $1,000 for a TEU and $2,000 for an FEU.

Amid rising geopolitical tensions, a rebound in global market demand and shifts in trade patterns, many Chinese exporters are postponing shipments, switching their transportation strategies, or preemptively handling orders for the second half of the year to proactively address rising costs.

Despite a significant uptick in orders from Europe and the Middle East, Rollmax Shutter Component Co Ltd, a roller shutter component maker based in Ningbo, Zhejiang province, has delayed the shipment of several containers this month due to a nearly 50 percent surge in ocean freight costs compared to last year, coupled with challenges in securing container space.

Ding Yandong, the company's president, said the cost of shipping a 40-foot container to Saudi Arabia has risen from around $3,500 earlier this year to between $5,500 and $6,500 this month.

To cope with the increasing ocean freight costs, he has advised clients to consider alternatives such as cargo freight and the China-Europe freight train services.

To ensure timely delivery, some foreign trade companies have also started shipping orders for the second half of this year as early as in May and June.

"Previously, we primarily used fast sea freight services, but now we are opting for slower conventional ships, extending the cargo turnover cycle to reduce costs," said Luo Qian, head of operations at Shenzhen Hanlin International Trade Co Ltd, a Guangdong province-based exporter of electronic and household products.

"We are also taking necessary measures to cut expenses by planning shipments one to two months in advance," said Luo.

Since 2024, product demand in Europe and North America has improved marginally, providing fundamental support for the increase in prices in maritime shipping in China's foreign trade sector, said Yuan Qian, an associate researcher at the Beijing-based Chinese Academy of Macroeconomic Research.

Affected by expected uncertainty of trade policies with the US general election later this year, together with expectations of peak season price increases, many US retailers and businesses from other sectors have initiated front-loading of inventories, further boosting demand for maritime shipping, said Yuan.

From the supply side, ongoing tensions in the Red Sea region have led to cargo ships being rerouted around the Cape of Good Hope in South Africa, significantly increasing the distance and days of navigation, and also driving up prices for shipping containers, he added.

"This situation will last for another two or three months. July and August are the traditional peak season for shipments, and August and September are the peak season for e-commerce businesses across the world," said Tang Qianjia, vice-president of Shenzhen Tiantu Tongxun Supply Chain Co Ltd, a freight forwarder in Guangdong province.