MSC Posts Mid-November FAK: $4,600 North Europe, $5,900 Black Sea, $7,600 Algeria

The Analysis

MSC posted a new Far East to Europe freight-all-kinds card on 29 October. It runs from 15 November to 30 November. Seven numbers, one per destination range, all per 40ft: North Europe $4,600, West Mediterranean and Adriatic $5,300, East Mediterranean $5,700, Black Sea $5,900, Casablanca $6,200, Tunisia $7,200, Algeria $7,600. Maersk announced a Far East to North Europe and Mediterranean increase the same day, effective 16 November, and published no levels. That is the news, and it takes about thirty seconds to read.

The number nobody quoted is $3,000. That is the distance between the bottom rung of this card and the top one, and the bottom rung is the only one that made the headlines. North Europe at $4,600 is what gets forwarded around. Algeria at $7,600 is 65% higher, and for plenty of shippers it is the same box, discharged off the same ship, out of the same Chinese port. A card with a $3,000 ladder in it is not a rate. It is seven different products that happen to share a publication date.

Two more things before anybody acts on it. The reports say freight forwarders are already being quoted discounts off this card. That single word turns the card from a price into a list price, which in this trade means an opening position rather than a closing one. And the previous card, the one issued 17 October covering 1 to 14 November, is described as about $100 lower in North Europe, so call it $4,500. That last figure is my back-calculation from a rounded word in a report, not MSC's published number, and I am flagging it as exactly that, because a back-calculated number and a published one are not the same animal. Check it against your own October invoice. Show me the number, not the feeling.

Read the seven as a ladder and the card changes shape. Bottom rung, North Europe, $4,600. West Mediterranean and Adriatic $5,300, which is $700 more, or 15.2%. East Mediterranean $5,700, another $400, or 7.5%. Black Sea $5,900, another $200, or 3.5%. Casablanca $6,200, another $300, or 5.1%. Tunisia $7,200, a jump of $1,000, or 16.1%. Algeria $7,600, another $400, or 5.6%. Top over bottom is 1.652. If your North Africa volumes and your Rotterdam volumes are sitting inside the same annual tender, this card is telling you they were never the same product and should not have been priced as one.

Distance does not explain it, and that is the first useful thing the ladder tells you. Casablanca sits outside the Mediterranean, on the Atlantic side of the Strait, and it is $1,000 cheaper than Tunisia and $1,400 cheaper than Algeria, both of which are inside. A vessel working Casablanca does not enter the basin at all. So the $1,000 is not an ocean mile charge. What sits behind it, on my reading and not MSC's, is the last leg: Tunisia and Algeria are served largely by feeder off a western Mediterranean hub, and you pay for the feeder, for the extra handling, for the smaller call and for the friction of a port that has fewer competitors watching it. The ladder is not priced by geography. It is priced by how much of the journey happens after the trunk vessel has gone.

Two rungs deserve their own look before we move on. The Adriatic is bundled with the West Mediterranean at a single $5,300, and bundling is a choice rather than a convention, because in most tariff structures an Adriatic call carries an add-on over a western Mediterranean one: it is further in, and it is frequently worked by feeder out of the same hub. Bundling the two at one number means somebody on that rung is paying for a leg they are not using and somebody else is getting one free, and which of the two you are depends entirely on whether your volume lands at Genoa or at Rijeka.

Ask for the split. The Black Sea at $5,900 is a different animal altogether. It is the lane on this card with the fewest carriers willing to quote it at all, and lanes with few quoters do not price off cost, they price off who else is in the room. When the reports say the Black Sea moved hardest against the 17 October card, the honest reading is not that something happened to the cost of moving a box into the Black Sea. It is that the carrier found out how few people were going to push back.

The steps are not even either. Seven hundred, four hundred, two hundred, three hundred, one thousand, four hundred. The median step is about $350 and one step is roughly three times that. A discontinuity that size usually marks a change in the cost model rather than a change in cost: somewhere between Casablanca and Tunisia you cross from trunk port with a direct call to feeder port behind a hub. Find that line in your own network and you have found where your negotiating room is, because everything above the discontinuity is a last-leg cost you can sometimes re-route, and everything below it is trunk capacity you cannot. Where precisely the line falls is a routing question rather than a rate question, and Ömer Kaya would start from the hub and work backwards; all I can tell you from the card is that there is a $1,000 wall in there somewhere and you should go and establish which side of it you are standing on.

Now the two lanes the reports flagged as moving hardest, and here the arithmetic runs out of inputs. East Mediterranean and Black Sea are described as jumping against the 17 October card while North Europe added about $100, and the before figures for those two are not given. An absence like that is itself a signal: carriers publish before-and-after when the before flatters them and stay quiet when it was promotional. So I will put placeholders in and label them loudly. Assume East Mediterranean came off $5,200 and Black Sea off $5,300.

The moves are then $500 and $600, or 9.6% and 11.3%. Those are my numbers, invented to make the arithmetic visible, and the entire point of writing them down is that you can replace them with your own October invoice in about four minutes. What survives without any invention is the ranking. East Mediterranean and Black Sea moved several times harder than a $100 move on $4,500, which is 2.2%. A lane that can move ten per cent in a fortnight is not a lane you should be tendering once a year.

Base freight or surcharge, which is the question I ask before I believe any rate card. FAK means freight all kinds and on a card like this the figure is the ocean leg. It is not the figure on your invoice. Stacked on top sit bunker adjustment, any peak season line that is running, terminal handling at both ends, and whatever canal or war risk line the carrier is carrying that month. I do not have MSC's November surcharge file and I am not going to invent one, so here is the shape of the calculation instead, with the assumption stated: assume your add-ons come to $1,200 per 40ft, and check that against your last invoice before you use it.

North Europe all-in is then $5,800 and Algeria all-in is $8,800. Now put a competitor next to it quoting $5,000 all-in to North Europe. On the card they look $400 more expensive. On the invoice they are $800 cheaper. Every buyer I have watched lose money on a rate card lost it on precisely that move, and they all had the card in front of them when they did it.

Whether the card touches you at all depends on how your contract is written, and this is where people misread their own exposure. If you bought all-in, the card is information about your next negotiation and nothing else; reading it as your cost this month is a category error. If you bought freight plus surcharges as they are published, the card is your cost today and the surcharge file is your risk tomorrow. Ask your carrier which of the two you are on, per lane, in writing. A carrier that answers with a shrug is telling you it reserves the right to move money between the two lines, which is the same as telling you the $4,600 is not the number that matters.

The validity window is worth thirty seconds of arithmetic because it is not symmetric. The 17 October card covered 1 to 14 November, fourteen days. This one covers 15 to 30 November, sixteen days. November has thirty days and the carrier cut the month at the middle of the calendar rather than the middle of the month, so the second half carries two extra days. Small, but it lands on you if you ship weekly. Assume four 40ft a week to Rotterdam. November is 4.29 weeks, call it 17 boxes. Two of those weeks, 8 boxes, price off the old card at roughly $4,500, which is $36,000.

The remaining 9 boxes price at $4,600, which is $41,400. Total $77,400 across 17 boxes, an average of $4,553. If your November budget was built flat at $4,600 you over-reserved by $47 a box, and if it was built flat at $4,500 you are short by $53. Neither will sink you. The reason to run it anyway is that the same method is what you need in December, when the step will not be $100.

Look at the notice periods next, because three announcements in one week give you three different lead times. 17 October announced for 1 November is fifteen days. 29 October announced for 15 November is seventeen. Maersk, 29 October for 16 November, eighteen. They are lengthening, and the gap between MSC's effective date and Maersk's is one day. Read that as behaviour rather than coincidence. When a carrier hands you more notice, it is buying itself a longer window in which you can still book at the old price and it can count the volume you pull forward as volume it won. That is not customer service. It is a volume grab in a customer service costume, and it works because most shippers do not read the date line, they read the dollar line.

Maersk's silence is worth something too, and it is worth deciding now what you will do with it rather than on 16 November. An announcement without levels is an option, not a price. The carrier has told you it intends to charge more and has kept the right to decide how much after watching the market for eighteen days. That asymmetry is usable in your direction. MSC has shown its hand at $4,600 for North Europe, every shipper in the lane now holds a published number, and Maersk's sales desk knows it. So the move is not to guess whether Maersk lands higher or lower. It is to walk into the 16 November conversation with $4,600 written down as the number to beat, and to make sure you are not the one who reveals what your competitor was quoted. A carrier that publishes nothing is asking the market to price itself. It does not need your help doing it.

Here is the thing no headline carried, and the thing I would actually charge for. It is not the $4,600 and it is not the $3,000 ladder. It is 30 November. This card dies on 30 November and the next one is born on 1 December, and month boundaries are where general rate increases go to live. Every box you can drag from the first week of December onto the last five days of November escapes the December card completely, and the value of that escape equals the size of the December increase, whatever it turns out to be.

So price the move rather than speculate about it. Assume a 40ft of general merchandise worth $60,000 and carrying cost of 20% a year, both my assumptions, both worth replacing with your own. One day of carrying is $60,000 multiplied by 0.20 divided by 365, which is $32.88. Pull a box forward seven days and the carrying cost is $230. If the December card lands $400 higher, you are $400 better off and $230 worse off, net $170 a box. Break-even is 400 divided by 32.88, which is 12.2 days.

So at a $400 increase you can drag a box forward twelve days and still win; at a $200 increase break-even falls to 6.1 days and pulling forward stops paying for most cargo. That is the calculation to run on or about 12 November, when the next card should drop if MSC holds its two-week rhythm, and it is not a calculation to guess at now.

The second half of what the reports missed is that word, discounts. Freight forwarders are already being quoted below card, which converts the whole publication from a transaction price into a list price, and a list price is a starting position. The discount is also not going to be uniform across the ladder, and this is where you can get hurt twice. Ask your forwarder for one thing: discount off card, in dollars, per destination, in writing. Then convert each to a percentage. If North Europe comes back at 6% off $4,600 and Algeria comes back at 2% off $7,600, you are paying the ladder twice, once in the published spread and once again in the discount structure, and you should say that out loud in the negotiation. My expectation, offered as an expectation and not as a fact, is that the steep end carries more room, because that is where the carrier has the most margin per box and the fewest competitors watching the number. Test it rather than believe it.

Then the question of who can actually absorb it, which is where a rate card turns into a product decision. Take the same 40ft, $60,000 of merchandise, 15% gross margin, so $9,000 of margin inside the box. North Europe freight at $4,600 consumes 51.1% of that margin. Algeria at $7,600 consumes 84.4%. Same factory, same container, same sailing, and the ocean leg eats a third more of your profit purely because of where you discharge. Now invert it, which is the version I find people actually act on. Set freight equal to margin, so 0.15 multiplied by V equals 7,600, and V comes out at $50,667.

Below that cargo value, a 15% margin box into Algeria is being shipped at a loss before you have paid for a single truck, a single broker or a single day of storage. Run the same inversion for North Europe and 0.15V equals 4,600 gives $30,667. The two critical cargo values are $20,000 apart, per box. That $20,000 is what the ladder is really billing you for, and it belongs in front of your product managers rather than the $4,600.

Three ways this card turns out to have been noise, and I would rather name them than pretend the read is one directional. If Maersk publishes its 16 November level at or below $4,600 for North Europe, then MSC's $4,600 was an anchor the market declined to follow, the hundred dollar move was optics, and anybody who locked November volume on the announcement paid for a rise that never arrived. If the ladder width compresses, with Algeria over North Europe falling from 1.652 to somewhere under 1.5, then whatever is pricing the North African end has eased, and that is the week to re-tender Algeria and Tunisia rather than the week to accept a rollover.

And the one that never gets modelled: cards hold only as long as sailings fill. A published card is an intention, not a contract. If the second half of November sails away at 85% rather than full, the 1 December card does not get the increase everybody is budgeting for, and every box you dragged forward to beat it was a box you paid twelve days of carrying cost on for nothing.

So the decision date is not 15 November. It is 16 November, the day Maersk has to show a number, because a carrier that announces without levels has told you it does not yet know what the market will pay, and you should not be the one to find out for it. If Maersk comes in under $4,600, the smartest thing done that week was waiting. If it comes in over, the second smartest thing was having the pull-forward decision pre-approved so you can execute it inside five days instead of scheduling a meeting about it. Show me the number, not the feeling, and do not lock a thing until somebody other than MSC has named a price.

↑ Back to the key points

— By Vivian Zhao