NVOs bear higher rate hikes on TP

   Non-vessel-operating common carriers have borne a higher degree of ocean freight rate hikes in the past month than beneficial cargo owners (BCOs) who booked directly with ocean carriers, according to research from American Shipper.
   According to the results of American Shipper’s latest Transpacific Pulse survey, released Monday, 76 percent of the shippers who indicated their rates have risen significantly in the last month are third-party logistics services providers or intermediaries.
   Shippers, whether retailers or manufacturers, accounted for the remaining 24 percent.
   The figures jive with anecdotal rate information conveyed to American Shipper in the past few days from a number of NVOs, who said they have been subject to carrier rate increases in the past three to four weeks that far exceed those assessed to direct shipper customers.
   Carriers on the transpacific have been focused on increasing revenue levels on the trade, mostly by implementing a series of rate hikes and surcharges since the start of the year. Transpacific Stabilization Agreement member lines are seeking another increase, a recommended peak season surcharge of $600 per FEU from July 1.
   NVOs contacted by American Shipper said the prevailing rates for a 40-foot container from base China ports to the U.S. West Coast are around $1,600 to $1,800 all-in for BCOs, but $2,000 to $2,500 per 40-footer for NVOs.
   Typically, NVOs pay higher rates than BCOs, but the split tends to be $100 or $200 higher, not $400 to $600. The NVOs characterized the carriers’ diligence in collecting higher rates from them as an attempt to wrest market share back from the non-asset operators.
   Rumors of different rate standards for NVOs and BCOs have swirled through the latter half of May, just weeks after the conclusion of an annual contracting season that was considered mediocre for transpacific carriers.
   A spokesperson for the U.S. Federal Maritime Commission said to American Shipper that “FMC staff has heard from a couple of NVOCCs with this concern but has not received an influx of complaints.”
   Martin Dixon of the London-based consultancy Drewry told American Shipper Monday that the company’s index of transpacific spot rates hasn’t shown the blip that NVOs say they’re seeing.
   “Eastbound spot rates have remained largely unchanged in recent weeks,” he said. “However, we expect carriers to make all attempts to force through the (peak season surcharge) which will impact NVO rates but also, more importantly, smaller BCO rates.”
   One NVO that American Shipper spoke to said he’s expecting the July 1 peak surcharge to be “significantly mitigated,” though he admitted no carrier yet has “diverged or talked mitigation yet.”
   American Shipper reported in its March cover story about how NVOs won sizable market share from carriers in 2010 and held that share in 2011. Market share growth has been a defining characteristic of the NVO-carrier dynamic in the last decade, but there remains a fragmented NVO industry serving U.S. inbound container markets.
   According to data from trade intelligence firm Zepol Corp., the biggest single U.S. import NVO, Expeditors International, had only an 8.1 percent share of the market in 2011.
   Delving further into the latest TP Pulse results, 51 percent of overall shipper respondents (3PLs and direct shippers) said their rates increased in the last month. But the number of retailers and manufacturers who saw their rates rise modestly was double that of those who saw it rise significantly. Put another way, retailers and manufacturers were more than twice as likely to see modest rate hikes than significant ones.
   3PLs, on the other hand, were twice as likely to see significant rate hikes as modest ones.
   Of 98 shippers respondents to the question about rates, 39 were 3PLs, 29 were retailers, and 27 manufacturers (three fell into the “other shipper” category). Only six total retailers or manufacturers said their rates rose significantly in the last month.
   There was a fairly even breakdown among total shipper respondents in terms of how their rates behaved. Nearly 26 percent said their rates rose significantly, another 26 percent said they rose modestly, 22 percent said they remained the same, and 14 percent said they decreased modestly. Four percent said their rates decreased significantly. Bear in mind, these divergent trends (with nearly 52 percent of shippers’ rates increasing and nearly 41 percent staying stable or falling) occurred in the last month.
   This suggests that different classes and sizes of shippers are indeed being treated differently by carriers – perhaps an argument against the idea that container shipping is veering single-mindedly down the path toward commoditization. – Eric Johnson