A capacity crisis has built up and reached critical mass in the TransPacific Eastbound ocean trade. See the bullet facts following:
- Currently, the ocean “spot rate” market is running $1,500-2,000.00 HIGHER than most contracted rates.
- Vessel operators, in collusion with the “alliance members” have been systematically reducing available capacity on the TP routes for many months; including using “blank” sailing strategies and even suspending or outright eliminating entire strings, permanently. 7%+ of the TransPacific capacity has been removed from service in the last 60 days.
- This is causing significant “roll” risk to the NVOCC’s and BCO’s alike.
- Alliances and vessel operators are subjectively reducing contracted allocations, in order to open up capacity to the “spot rate” market where they are achieving higher than contracted rates.
- BCO’s (Beneficial Cargo Owners) & NVOCC’s (Non-Vessel Operating Common Carriers/Forwarders) who have not fully utilized their allocations in any given month are having their allocations reduced or removed to accommodate the higher margin “spot rate” market.
- Allocations for contracted rates are NOT being increased for anyone right now.
- GRI’s and PSS have been announced early and anyone not accepting them are at risk of being rolled for the higher margin “spot rate” containers.
- The new China Import tariffs that are set to apply over the next two months are also causing huge increases in container volumes for importers increasing their PO release numbers to hurry the product into the US before the tariffs hit.
All of the above is creating pressure on the ocean supply chain that has not been seen previously; with the global economy currently increasing demand for containers, while at the same time alliances systematically removing capacity, we find ourselves in a situation of “pay to play” in order to keep containers moving and sailing on intended vessels.
In the same way passenger airlines purposely overbook in order make sure planes are “full”, the ocean alliances find themselves in this position right now with all vessels being +100% booked, and able to choose what containers load or roll. In this scenario, alliance members are able to load the higher rated, higher margin containers ahead of the lower rated/margin containers.
TOC Logistics International Inc. must engage our TransPacific clients in serious Peak Season Surcharge discussion for their specific lanes where vessel operators are refusing to load containers under contracted rates without a PSS, and where vessel operators are refusing to allow bookings outside of contracted allocation counts. Whether TOC Logistics is your provider or not, it is imperative that you engage your provider ASAP to make appropriate arrangements to minimize the impact to your supply chains.
We encourage you to search all market publications and ocean news outlets to see for yourself the serious nature of the TransPacific situation. We look forward to working with each of our clients to review and negotiate the right resolution for them.