Commentary: A pretty low “peak”

Commentary: A pretty low “peak”

Commentary: A pretty low “peak”

   Liner carriers have spent much of this year cutting costs and trimming services, not to mention bemoaning exceedingly low ocean freight rates, so it’s a little surprising to see the words “peak season surcharge” popping up these days.
   If seasonal demand is creating a slight increase in volume in this catastrophic year, does that really constitute a peak? Lines have reduced millions of slots of capacity worldwide to better bring utilization in line with demand, but that doesn’t mean things are actually peaking.
   The operative question here is: when is a surcharge not really a surcharge at all? What we’re actually talking about is semantics — in other words, where does a base rate end and a surcharge begin? Maersk Line and CMA CGM have recently introduced-$150 per-TEU “peak season surcharges” between Asia and Europe, ones they say are justified by improving volume. Other lines either have, or are expected to, follow suit.
   “What we witness is that the demand for space from Asia to Europe has sharply increased since the second part of June,” CMA CGM said in an e-mail to American Shipper Tuesday. “It is a combination of reduction of capacity operated by various lines in the first half of 2009 and a rebound of volumes as per the normal seasonality in this trade when the demand always peaks during summer months.”
   Well yes, volume is improving compared to the last eight or so months, and only because capacity has been removed, but that’s not really a peak is it? If someone is accustomed to a full glass of water but now only receives a thimble, and that thimble overflows, that doesn’t exactly mean the cup runneth over.
   Let me be clear, I’m not begrudging the lines in their attempts to make a viable amount of money on each sailing. They are due more per TEU than they’ve been getting, particularly in the ridiculously rollercoaster Far East/Europe trade. But it’s a little misguided to label a general rate increase a peak season surcharge when this year’s “peak” is like Death Valley compared to those in recent years. Perhaps shippers have painted the lines into a corner, steadfastly holding firm on base rates and punishing the lines for overzealous capacity additions.
   Perhaps the only way to get something accomplished is to attach a tag that suggests need and desperation. After all, shipper groups have been clamoring for bunker costs to be part of all-in rates, while lines continue to separate them out and shippers duly pay.
   But it’s a hard sell when carriers claim demand is so low that scores of ships must be idled and services merged, then turn around and say demand is peaking. We’ll see how it plays out. ' Eric Johnson