The problem with the rate rollercoaster
Mike Weir | Friday, 17 August 2012
UK forwarder says volatility of Asia-Europe freight rates forces some importers to source goods elsewhere
And those worries, voiced to Lloyd’s Loading List.com by a concerned UK freight forwarder, will not go away any time soon, especially in light of Evergreen’s new Asia-Europe service (reported here today) which could further unsettle the turbulent route.
“Companies that we talk to are amazed at how much freight rates have been increasing month on month and it’s difficult for them to understand that, especially when they’ve got low value goods,” said Simarco Sales Director, Chris Bentley.
“Because we get involved with people who may be fairly new to this, either starting up or not been in business long, they ask us what the price will be next week.
“They want to know what they are going to be paying next month but we can only give them an indication and that’s all.”
Bentley added that he believes rates are on the way back down and that for the first time in years Simarco has received steep discounts on the published rate only two weeks after a General Rate Increase, the latest having occurred on 1 August and widely viewed by the industry as a failure.
“Many importers are frightened and it’s really making them think about sourcing their products from somewhere else," Bentley explained.
“Of course shipping lines need to make money but for the importer who was used to the old freight rates, which were low, they are used to that and will have done their costings in January yet by May their costs have shot up. You can’t allow for that when you’re planning production.
“It strains our customer relationships. A lot of them don’t expect the rate increases and can’t understand why the increases are so big and are made in way that means they can’t add to their sell price.
“We’re fighting for margin as well and we might also have to make a little bit less. We can’t influence this so all we can do is lose margin on ocean freight and gain it back by offering value added service at this end."
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