It's a Jungle Out There!

Posted March 20, 2012
Hello Friends,

No matter which way we turn one thing is clear, ocean freight rates are on the rise. Regardless of the trade lane, General Rate Increases (GRI's) are being received across the board from all ocean carriers.

Although many increases took effect on March 1st, additional increases are forthcoming taking effect on April 15th. GRI's range from $250.00 usd per 20' container to $550.00 usd per 45' container in many trade lanes. In general the market is seeing rates increase over 13% with some grumblings that further increases may be slated for May of this year.

Adding insult to injury, the demand for container shipping space is slowing leading many ocean carriers to increase rates as a result. While some carriers have made the decision to idle ships, many carriers are increasing rates and choosing to keep the capacity in the market expecting growth in the U.S. economy. Maersk Line CEO Soren Skou was recently quoted in a Journal of Commerce article as stating that "Container shipping lines have idled about 5% of the global fleet capacity, or 800,000 20 foot equivalent units". Based on current economic conditions some in the industry feel this figure could rise to more than 1,000,000 TEU's in the near future.

With estimated losses of $5.2 billion by ocean container carriers in 2011, all options are surely on the table given the uncertain economic outlook ahead for the remainder of 2012. An increase in "slow steaming", more GRI's, new surcharges, an increase in the number of idled vessels; nothing is off limits.

Unfortunately, given the current landscape of today's international shipping environment, it would be wise to account for increases in your transportation costs when determining the sell price for your products in the future.

Best Regards

Jerry Becnel
President
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