Shippers moving containers from Asia to the US are in the midst of very tough service contract negotiations. As anticipated, the carriers are demanding very strict container commitment guidelines, reductions in free time and significant rate increases.
Finding sufficient carriers to meet your forecasted container demand has been the biggest challenge for shippers since 2021 negotiations started. This represents a major shift from past negotiations when carriers pressed shippers for increased container commitments. Some carriers are going so far as refusing to entertain signing contracts with shippers unless they already have an existing contract. Even shippers that do have existing contracts are being told that increased container commitments will not be accepted in the new contracts.
Another reality that shippers must face is the reduction in free days that containers can be held at your warehouse before additional fees are charged. It is not unusual for shippers to secure 10 to 14 days of free time to unload a container. With import rates from Asia at all-time high levels, carriers want empty containers shipped back to Asia as soon as possible. Shippers could be forced to pay penalties as high as $250 per day for each container exceeding the reduced free day guidelines.
Asia to US contract rates are expected to increase between $1000-$2000 a container over 2020 rates depending on the origins and destinations involved. The projected demand for 2021 is so strong that carriers are able to be very selective on the contracts they sign. Shippers have very little recourse this year but to accept the exorbitant rate increases. Shippers unwilling to pay the increases will need to rely on shipping in the open market which is a very risky strategy. Unless there is a global event causing demand to suddenly plummet, rates in the open market will remain well above contracted rate levels throughout the 2021 shipping season.
