Ocean freight rates on the Far East-Middle East sector will increase again by the end of the month in anticipation of a surge in year-end cargo volumes.
Industry sources said the main shipping lines, which are members of the informal rate agreement (IRA) governing the Far East-Middle East trade, are expected to meet shortly to discuss the general rate increase.
The increase will follow the August peak season surcharge of $150 per 20-foot unit (TEU) and $300 per 40-foot container levied by the IRA and the increase in the fuel adjustment factor in July (from $82 per TEU to $117).
These rates are applied over and above the prevailing freight rates, which are $1,000 to $1,200 a TEU from Chinese ports.
The IRA also attempted to implement a general rate increase of up to $300 per TEU in July but implementation was less than 100 per cent due to lower than expected cargo volumes, said sources.
The market could only sustain an increase of about $150 per TEU, they said.
The shipping lines appear to be more confident of sustaining the forthcoming rate increase based on optimistic forecasts. A 10 to 12 per cent increase in cargo volumes is expected in the fourth quarter.
The size of the rate increase will depend on the loading forecasts for two sailings from Chinese ports in the latter half of this month, said a shipping source. "If the loadings are strong then the rate increase is likely to be higher and vice versa if the opposite is the case," he said.
"Last month there had been a general decline in freight rates due to weakening demand and increased tonnage as a result of shipping lines introducing new services," said the source. "The shipping lines did not expect the decline and though it is a temporary effect, there is a sense of insecurity, stoked by the new services and increased tonnage capacity available."
Also, demand was weak due to China closing down for a ten-day national holiday last month and traders deferred orders until it reopened.