Time to "Pay The Piper"?

In History, an old tale tells us of, the piper who was owed payment after solving an overcrowding problem for a small medieval village, dire consequences awaited the village when they tried to avoid paying the piper for his expertise in export services. 

Over the past few years, international shipping companies have been operating at significant loss in order to address demand for cargo services, especially between the U.S. west coast and Asia. 

Not so any more.

The carriers have been on a mission since last summer to raise the ocean freight rates in an effort to make back all that money they lost in ’08 and ’09.  Right now in the Pacific Rim where most traffic lies, the ocean freight rates have risen dramatically this year (between $1500-2000 a ’40) with another Peak Season Surcharge set for June 15^th of $400/40 avg.  

Just as we have seen for the past few years, the Cargo Carriers also use the bunker (BAF) or floating fuel surcharge as leverage to have a reason to raise the rates if they have contracts locking in prices with their customers.

As we notice the price of a barrel of oil has decreased recently from $90 to $70 a barrel, of course the ocean freight or BAF has not decreased, it has not changed.  However when the price of oil goes back up again, which you can bet on given the recent Gulf mess, there is a high likelihood that the bunker will increase again sometime this year.  Otherwise you may find more “space problems”.

SOURCE:
http://www.hellenicshippingnews.com/index.php?option=com_content&task=view&id=102937&Itemid=79

The cost to produce/extract mineral/fossil fuels goes up when disasters like our oil spill in the Gulf. Especially as resource exploration and drilling production regulations adjust to prevent similar disasters in the future.

BOTTOM LINE: Get your shipping contracts in place sooner rather than later to lock in your best prices.