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Charter carriers see trans-Pac activity ebb to start 2022

US forwarders say charter carriers have provided some cushion during the exceptionally tight ocean shipping market. Photo credit: Shutterstock.com

Charter carriers and extra-loader services that debuted in mid-2021 amid record demand are hauling fewer containers into the US West Coast as spot rates in the trans-Pacific plateau following the Lunar Year surge and an import logjam now brews in Shanghai.

Data from PIERS, a sister company of JOC.com within S&P Global, shows five liner operators – BAL Container Lines, CU Lines, Lihua Logistics, Transfar Shipping, and X-Press Container Line – started landing their first imports into the US roughly around June 2021. After seeing their volumes peak in January 2022, the monthly number of imports they carry has fallen through March, PIERS data shows.

But forwarders familiar with the charter carriers say they did not enter the trans-Pacific market to serve exporters. Rather, the charter carriers were port-to-port, spot market services that offered much needed vessel space at a time when major container alliances throttled back available capacity to many of their regular customers.

Volumes on charter carriers drop

Those benchmark rates do not reflect various peak-season and other surcharges applied by ocean carriers.

Over the last half of 2021, the five charter carriers handled a combined total of 125,112 TEU, according to PIERS. But after mostly seeing monthly gains over 2021, their volumes have been dropping so far this year. The carriers handled a total of 15,513 TEU in March 2022, down from a peak of 41,190 TEU in January.

The volume slowdown coincides with spot rates on the trans-Pacific peaking in 2022, with Xeneta’s benchmark rate into the US West Coast hovering between $8,500 and $9,000 per FEU from January through April.

Exports have been another matter. Between June 2021 and April 2022, PIERS data shows that, save for one voyage made by a BAL Container vessel last October, none of the charter carriers handled US exports. The issue of whether export space is being denied in violation of the Shipping Act by the carriers is now the subject of the probe by the FMC’s Bureau of Enforcement.

The five carriers did not respond to requests for comments on their import and export programs.

Primarily spot market carriers

Alphaliner’s most recent weekly newsletter said these new entrants and other small carriers only amount to 4.2 percent of trans-Pacific shipping capacity. Still, three forwarders who have worked with these carriers told JOC.com even that small amount of spot capacity was helpful during 2021.

The forwarders said they are not aware of any of the carriers offering long-term contract capacity.

An East Coast-based forwarder who asked not to be identified told JOC.com that Transfar has been at times handling up to one-fifth of their trans-Pacific volumes. The forwarder said the relationship stemmed from not being able to get vessel space from their regular carriers.

“When things started getting tight, it wasn’t even a matter of price, we couldn’t get the allocation and our business was stalemated,” the forwarder said. “But we could with the charter ships. It’s worked really well for us and enabled us to grow.”

According to Transfar’s website, the carrier focuses on cross-border, ecommerce freight. Transfar, which serves the US West and East Coasts, appears to be in the market for the long haul. Primarily a vessel charterer, Transfar bought its first ship, the 2,797-TEU Windswept, Alphaliner reported in February.

Heightened due diligence

Using new carriers, though, requires more due diligence, the forwarder source said. Customers have to know whether the carriers operate safe ships and that they pose no credit risk, he said.

A forwarder based in the southeast US who did not want to be identified said there were some early challenges when he booked trans-Pacific import capacity with CU Lines last year. CU Lines, which primarily offers intra-Asia feeder services, entered the trans-Pacific market in 2021, according to its website. It now offers trans-Pacific services into the Southern California ports.

“CU Lines, we used some,” the forwarder said. “Early on, there were issues with no agent communications and no fixed port calls. They are better now.”

“They have good spot rates, but I don’t think we can get a fixed rate deal with them,” the source added.

An executive with a San Francisco-based digital forwarder who has also worked with Transfar said that while it’s not an express service, forwarders and shippers can quickly get space if there’s more freight than their other carriers can handle.

“They are your standard extra-loader service and charge a premium above the spot market like most do,” the executive said. “But it’s guaranteed space and the sailings are as reliable as anything else.”

“The bigger clients tend to like it because they can move a big block of containers all at once,” the source added. It’s nothing that I would ever think anyone would book contract freight on.”