Freight Rates on U.S. Imports from Asia Could Increase as much as 20 Percent in 2019-2020 Contracts

March 11, 2019 | The Toy Association has learned that contract freight rates on U.S. imports from Asia are projected to increase by as much as 20 percent in 2019.

According to an article published by JOC.com, the rates will increase in the 2019-2020 shipper-carrier contracts that take effect May 1 and later. The projected contract increases are based on a spot freight rate index that has been accurate in the past in predicting contract rates. Ocean carriers have also shown collective resolve to keep rates high, such as by blank (skipped) sailings. 2019-2020 rates will likely range from $1,350 to $1,550/FEU (Forty-foot Equivalent Unit) to the west coast, with east coast rates $1,200 higher.

The projected increase in base rates does not include a bunker fuel surcharge, expected to be added around January 1, 2020, when the International Maritime Organization’s (IMO’s) global mandate for use of low-sulfur fuel takes effect. Analysts project an increased cost to carriers for this fuel ranging from less than $100 per TEU (Twenty-foot Equivalent Unit) to more than $300, depending on crude oil and bunker fuel costs at the time.

“The ocean container shipping environment remains dynamic, with fewer, larger ships in service becoming the norm,” said Rebecca Mond, vice president of federal government affairs at The Toy Association. “This factor, along with the upcoming switch to low-sulfur fuel, could increase tensions between freight carriers and shippers and have a big impact on both contract rates and reliability of 2020 shipments.”

Added Mond: “We advise our members to be aware of these factors as they enter contract negotiations and recognize that the inverse relationship between negotiated contract rate and shipment reliability may be more acute this year than in the immediate past.”

Toy Association members may direct questions on this issue to Rebecca Mond or Alan Kaufman, senior vice president of technical affairs.