The evolving landscape in China and Southeast Asia, while presenting new complexities, also offers opportunities for IHA and IHSA members to adapt and succeed. This year’s contract negotiations, although responses by carriers were later than usual, may provide valuable insights that could enhance our future strategies and lead our carriers toward a course correction.

We proactively sent our information to carriers earlier than ever before, in mid-March. While large shippers (those with over 200,000 TEU) began their negotiations in February, their delayed commitment until April created a compressed timeline. This ripple effect shifted negotiations with Beneficial Cargo Owners (BCOs) and Shippers Associations into April, further condensing the window for our discussions, as they commenced talks with Non-Vessel Operating Common Carriers in early May.

Simultaneously, carriers were strategically optimizing their vessel utilization by relocating or blanking bookings to maximize their efficiency and revenue in markets less impacted by tariff adjustments.

Despite the shifts in traditional negotiation timelines and carrier resource allocation, we are actively working to refine contract details regarding rates, routes and areas of coverage. Our ongoing efforts to resolve these issues with carrier partners underscore the importance of our collective vigilance in ensuring accuracy and advantageous outcomes.

Navigating The Current Environment

1. Early Peak Season and Tariff Rush:

• A 90-day pause on U.S.-China tariffs (set to expire around mid-August) has led to a significant rush of cargo from China to the United States. Shippers are trying to get goods into the U.S. before the tariffs potentially resume or increase. This will significantly increase as we near the end of the 90 day Tariff standdown
• This has contributed to an earlier than usual “peak season” in shipping, leading to higher demand for vessel space and containers and pressure to provide a peak season surcharge.

2. Port Congestion in China and the U.S.:

• China: Ports in China, especially Shenzhen, Shanghai (Yangshan terminal) and Ningbo, are experiencing growing container ship queues and increased waiting times. Some ports have seen up to 50 vessels waiting to berth. This congestion is causing delays of 3-7 days or more depending on the carrier and trade lane. Intermittent port closures due to strong winds and dense fog are also compounding the issues in North China ports.

• U.S.: Major U.S. hubs like Los Angeles and New York are also seeing a steady increase in container ship queues. New York/New Jersey ports are facing high demand for gate appointments and potential empty return challenges.

3. Equipment Shortages:

• The surge in cargo is also leading to equipment shortages, particularly containers, at Asian ports. Carriers are starting to allocate containers based on available space and rate levels.

4. Impact on Rates and Surcharges:

• Transpacific spot rates are climbing sharply. For example, rates from Shanghai to Los Angeles increased by 27% in May, and rates to New York also saw significant jumps.
• Carriers are introducing General Rate Increases (GRIs) and Peak Season Surcharges (PSSs) in response to the increased demand and operational challenges. Some carriers have suggested there could be congestion surcharges.

5. Broader Supply Chain Disruptions:

• The congestion is causing a cascading impact on the wider supply chain, leading to reduced reliability, higher logistics costs, and increased complexity in inland transport planning. Delays are stretching transit times and disrupting inventory planning, pushing shippers to carry extra stock.

In summary, if you are looking to ship containers from China to the U.S. currently, expect:

• Delays: Significant delays at both origin and destination ports.
• Higher Costs: Increased shipping rates, surcharges and potential additional costs due to delays.
• Reduced Predictability: The market is fluid and subject to sudden changes due to policy shifts and operational pressures.

Navigating the Tariff Ruling by The Court of International Trade

The ruling yesterday evening by the Court of International Trade, which nullified President Trump’s tariffs, will be appealed. Resolving the core issues discussed in this bulletin will be a gradual process; however, a shift in the “90-day window” could profoundly affect the supply chain by altering shipper behavior. This could create more challenges but possibly some relief, unless there’s a stay of the judgement in the next 10 days.

These are significant challenges, and we’re committed to working through it together. We value your trust and are working tirelessly to serve the best interests of all our members.

Craig Akers
Executive Director

About IHSA

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