Face high freight rates! FMC made a move

Shippers and other players in the global supply chain will have the opportunity to explain to U.S. authorities how the escalating situation in the Red Sea is affecting their business. The Federal Maritime Commission (FMC) will hold an "informal public hearing" on the situation in the Red Sea and Gulf of Aden on February 7, a statement said. This hearing will provide a platform for stakeholders in the supply chain to communicate with FMC about the disruption to business operations caused by Houthi attacks on merchant vessels, the measures taken to respond to the incident, and the consequences and implications. The United States and the United Kingdom recently conducted a series of airstrikes in Yemen, the Houthis threatened further attacks on Red Sea commercial vessels, causing up to 90% of container ships to bypass South Africa's Cape of Good Hope, and at the same time, the attack prompted many shipping companies to sharply increase freight rates and introduce various additional charges, such as war costs, when sailing to and from Israeli waters. The general view in the shipping industry is that the Red Sea crisis is a short-term effect. Shippers are worried about high rates and supply chain disruptions, while global shipping companies are busy scheduling and even chartering ships for European and Mediterranean routes. Maersk is chartering ships on a large scale, and shipping giants such as MSC are also scrambling to rent empty containers in China and Southeast Asia, hoping to make a lot of money during the peak shipment period in Asia. At the same time, the shipping company announced that the freight rate of Europe and the United States will rise again from the 15th. According to the freight forwarding industry, the freight rate of the United States has risen by about $1,000 per 40 feet container, and the European freight rate has risen by about $1200-1500 per 40 feet container. Future rate increases are expected to be limited due to the reduction of ship classes and space, as well as other additional costs such as peak season surcharges.

At present, the Red Sea crisis has not found a solution, and a large number of ships from Asia to Europe may continue to detour the Cape of Good Hope until the first quarter, or even the first half of the year. This helps to support high freight rates and absorb excess capacity. The shipping industry's operating performance in the second quarter depends on two major variables: the development of the situation in the Red Sea and the status of orders in Europe and the United States. Europe was affected by the Russia-Ukraine war and the Red Sea crisis, the economic performance was not as good as expected, and demand was weak. In contrast, the chances of a soft landing in the U.S. economy are greater, and people continue to spend, so U.S. freight rates are supported and continue to rise. The US route is expected to be a major source of profit for the carrier. However, importers, exporters and shippers in China, the United States and other countries have complained about high freight rates and difficulties booking cargo space. As a result, the US FMC has decided to hold an informal hearing on February 7 to discuss the impact of the Red Sea crisis on the maritime industry and global supply chains. At a time when countries are trying to fight inflation and boost their economies, the FMC's move has attracted much attention, and the EU's moves have also attracted market attention.

It is understood that the FMC will collect opinions from all parties in the supply chain, including the reasonableness of the fees charged by shipping companies and whether there is discrimination and unfair trading issues.

FMC regulates the reporting system of various freight rates and enhances the supervisory power of the competent authorities over shipping business. The agency focuses on issues such as industrial monopolies and restrictions on the imposition of special fees. During the epidemic period, the two sides of the ship and cargo on the container detention charges and other issues have been continuously disputed, and it is reported that the shipping company and freight forwarder have been punished for this.