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Saturday, October 21, 2017

Lines again reach for the GRI button

Posted to Far East Maritime (by on July 19, 2012

Carriers have imposed a new round of freight rate increases, but their stickiness is questionable in a very weak market.

We don’t get it. With so much capacity in service and on the way, and with cargo demand falling, the lines are still imposing general rates increases.

Cosco, Yang Ming, Zim – you name it, they are all imposing GRIs of up to $400 per TEU between Asia and Europe. That is the same Europe that is struggling to claw its way out from under a mountain of debt.

Consumers in Europe have better things to spend their money on than consumer goods from China, which is showing signs of its own economic slowdown. In this uncertain climate of low demand and excess capacity, the announcement of a new raft of GRIs seems to be more wishful thinking than anything else.

For carriers desperate to find profitability when fuel comprises more than a third of operating costs, raising rates is the key. In the first half, several GRIs were imposed and the revenue increased sharply ­– spot pricing reached $1,934 per TEU in late April from $490 in December, according to Alphaliner –  completely against the supply-demand principle. By the end of May, the market was rejecting the GRIs and a peak season surcharge was quietly shelved when it became apparent there was not going to be any peak season.

Of the 14 shipping lines that proposed peak season surcharges for containers on the westbound Asia-North Europe trade, only Maersk managed to make it stick.

Now the GRIs are coming back and it will be interesting to see if they manage to collect.

Incidentally, fuel prices have fallen in the past couple of months and Alphaliner estimates the drop has led to a five percent in liner operating costs. Now if the top line can be improved, the carriers may have reason to smile again.

There is a long way to go until we see 2012 roll into 2013, however, and not much to get excited about in the global economy.

 

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