New GRI for Transpacific Eastbound to USA and What to Consider

It’s no secret that demand is at an all-time high in the shipping industry. We hear stories left and right about overbooked vessels, congested ports, dozens of ships awaiting docking and unloading, and even airport congestion now. It seems to just be the nature of how the industry is operating as of late due to the bounce back from the global COVID lockdown.

This high demand and low-capacity situation is taking a toll on shipping rates – especially for transpacific Eastbound shipments to the USA. Currently, there are both standard FAK rates and premium rates in place. Due to the significantly higher-than-usual demand, premium rates are especially high; at least in comparison to what most shippers are accustomed to.

At the time of writing, premium rates are currently going for approximately $2,000 more than regular FAK rates, which can be a steep number for shippers to stomach. As a result, several shippers are holding out and waiting until June or later for FAK rates to drop.

We hate to be bearers of bad news, but we’re here to tell you that may not be the best plan. Here’s why:

Importance of Premium Rates

Premium rates are issued by carriers as a “first-priority” guarantee that capacity will be allotted for your cargo. We’ve all heard of overbooked vessels and the nightmare of having cargo delayed for a future vessel pickup. Premium rates secure you against these situations by guaranteeing that your cargo will be loaded and prioritized above any and all non-priority shipments aboard the vessel. If someone gets the axe, it’s not going to be you.

Premium rates are helpful as a risk-mitigation strategy during peak seasons, but they are especially important during the bounce-back phase of a global pandemic… Despite the conditions of the market, you’re guaranteed space aboard a vessel. Why does that matter?

Shippers are reporting that cargo which has missed sailings due to overbooking is looking at delays up to several weeks (even a month or more in extreme circumstances.) Unless your cargo isn’t time-sensitive whatsoever, these types of delays as a result of port congestion are total deal breakers for most shippers.

In a way, once the risk outweighs the cost savings of general FAK rates, premium rates almost become “cheaper” due to the value they provide. If having your cargo delayed for a month is a deal breaker, premium rates don’t look too expensive anymore.

GRI Scheduled for June

Not to top more bad news onto the already chaotic market situation, but those who are waiting out for June to roll around and rates to drop should be aware that rates are only going up from here.

It was recently announced there will be a $1,200 increase to FAK rates beginning in June, meaning the gap between premium and non-premium rates will only be $800. And that’s $800 well spent when you consider the high likelihood of overbooked vessels and multi-week cargo delays.

What to Do

Simple: look for available sailings in May and book the premium rates. We know the additional $2,000 can be difficult to stomach when you weren’t expecting it, but the truth is that the shipping industry is only getting worse, and the regular FAK GRI’s coming in June are going to make every shipper wish they took advantage of the available premium options available in May.

If you’re struggling to figure out where to go from here, how to find available premium rate sailings in May, or whether or not that’s even the right call for your business at this time, please don’t hesitate to just call one of our team members and express your concerns and ask questions. We recognize this market has put several shippers in a sticky situation, and we’re happy to help you with any answers we can.

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