The beginning of 2012 witnessed the ocean freight industry raise rates not once but at least twice as it struggled to regain lost revenues. Maersk finally announced a 9.5% capacity reduction along its Asia-Europe tradelane with a possibility of an additional 9% capacity cut if it chooses not to renew 20% of its chartered vessels that are set to expire this year.
According to Maersk’s CEO, all total, about 5% of global fleet capacity has been idled so far.Similar to what we experienced with the airfreight market and recently the trucking market, as capacity leaves, higher rates will prevail. Will these rate hikes stick though? Particularly with so many new vessels under construction, many question the vessel owners’ ability to maintain such rate hikes.
In all of this drama is the freight forwarder. If these rates do stick, how will it affect the forwarding industry? The biggest effect would be that the freight forwarder will have to pay a higher rate that in turn will be passed on to the shipper at an even higher rate. This may be the case but many freight forwarders are able to negotiate much better with the ocean vessel operators and may be able to work out better rates then if the shipper was to go at it on their own. Also, in a tighter market, a freight forwarder can be a shipper’s best friend if that shipper is in need of and is unable to find ocean space. Much like a truck broker, a freight forwarder will be able to locate and make the necessary arrangements to book ocean freight space on behalf of a shipper. Still, if rates remain high, profits will be tight for the forwarder as it may prove difficult to negotiate a reasonable rate and/or pass along all charges to the customer. Larger freight forwarders such as Kuehne + Nagel and DHL will probably benefit the most as the larger forwarders are able to negotiate not only better rates but offer a variety of shipping options to help shippers.