IHSA and our carrier partners are fully engaged in contract negotiations that determine annual shipping rates for cargo shipped from Asia to the US. The new shipping rates will go into effect on May 1, 2020 and expire on April 30, 2021.
When negotiations began, both parties were prepared to discuss the usual topics of rates, fuel, detention free time and space allocation. The one issue neither party saw coming was the impact of the Coronavirus. The carriers had no choice but to increase the number of cancelled sailings on routes from China to the US when the Chinese government announced that manufacturing facilities would remain closed after Chinese New Year ended. The amount of demand impacted by the cancelled sailings is in excess of 1.5 million TEUs which is a very significant number. Carriers have made it clear that they have no plans to stop cancelling sailings until the virus is contained and demand improves.
Neither side has the upper hand at the negotiation table. There are too many uncertainties surrounding the short-term impact the Coronavirus is going to have on the shipping industry. For the next four to six months, there are scenarios where rates could spike significantly and scenarios where rates could plummet. When negotiations began, most industry experts predicted shippers would be able to walk away from the table with no rate increases or slight decreases. While that could still happen, it appears more and more likely that the carriers will hold the line on rates or secure slight increases.
IHSA will continue to have contracts with a wide range of ocean carriers. It is important to remember that the value that IHSA brings to our members is more than simply providing competitive rates, services and member rewards. The Association serves as the united voice to the carriers for the entire membership.