Tariffs & Price Hikes: A Summer of Consequences
Hopefully you have been paying close attention to the whirlwind of activities that are occurring or are about to occur in the coming weeks. July has shaped up to be a month of consequence for the international shipping industry on many fronts. International tariffs, increasing spot rates, and rising bunker fuel prices are examples of some of the activities playing out that will impact importing and exporting activities around the globe.
Tariffs. Companies with global supply chains will be especially hit (particularly those that own their parts manufacturing facilities overseas that import finished goods back into the US). The Wall Street Journal reports that closed loop supply chains will also be hit hard as US companies brace for retaliatory tariffs on US exports.
Spot rates. TheLoadstar.co.uk reports that “Asia-North Europe ocean carriers are looking to hike container shipping rates by up to $500 per teu from 1 July, as space availability begins to tighten.” Interestingly, these general rate increases (GRIs) come as proposed spot rates have fallen due to postponed bunker surcharge increases because companies don’t want to cede business to competitors. The coming weeks will shed more light on the state of the market as bunker rates are set to still increase, tariffs go into effect, and July marks the start of peak season.
We see rates increasing across the board to key ports of call around the globe. Will this stay the case long term? It is hard to say as there is still capacity in the market on some routes and competitive forces are still in play. No matter what, we can be assured that with the start of July, GRIs are expected to go into effect. As the effects of these GRIs are negotiated with carriers, we will find out if prices really do go up or not.
Rising bunker fuel prices has led to increased bunker rates beginning June 1, 2018. On July 1, many of the largest carriers implemented an additional “emergency bunker surcharge” (EBS) that increased carrier rates for all US exports.
This EBS is driven in part by: decreased oil production in Venezuela due to political instability; Iran’s decline in oil sales due to tough new sanctions being applied by the US; and the lack of oil export increases by Saudi Arabia and Russia, setting the stage for increased crude prices worldwide.
At XportForwarding.com, we will continue to monitor, track and provide insights to these current events that will affect market rates for shipping cargo. Through our “value rate” pricing index, we work to minimize the impact of any price increase that shippers might experience.
Mario Bruendel is CEO of XportForwarding.com, an ocean freight booking company. With 20 years of international shipping experience, he has strategically consulted with scores of businesses to help them grow internationally.
To see the impact of the EBS on the Xport Value Rate pricing index, go to xportforwarding.com and perform unlimited free searches to identify new pricing between your favorite ports. Check pricing often as rates will be incrementally updated across the index as Xport negotiates new rates with carriers.