Maersk and MSC File June 1 FAK and PSS Increases on Asia-Europe and Transpacific

The Analysis

Two carriers filed for the same effective date and the numbers do not sit together. Maersk put a new Freight All Kinds rate of 3,450 dollars per 40ft box to North Europe on the table, plus a peak season surcharge of 600 dollars on a 20ft and 1,200 dollars on a 40ft. MSC filed 5,400 dollars per 40ft to North Europe and 5,800 dollars per 40ft to the West Mediterranean. Both take effect on 1 June. Both carriers gave the same two reasons: strong peak season demand, and higher bunker and terminal costs. That is the whole announcement. It is dated 5 May, which leaves you 27 days.

I have a problem with the word coordinated. Maersk to North Europe at 3,450. MSC to North Europe at 5,400. Same lane, same direction, same effective date, and a gap of 1,950 dollars. On a base of 3,450 that is 56.5 percent. Two filings described as coordinated do not normally sit 56.5 percent apart. Either the base levels really are that far apart, which happens, or one filing carries in the base what the other one bills on the surcharge line, which also happens. Until you have both invoices on the desk you do not know which it is, and pretending you do is how budgets get missed.

So we run the numbers before we do anything else. Numbers first, then opinions.

Start with the structure, because the money in a filing like this is usually in the structure rather than in the headline. There are two layers. The bottom layer is the Freight All Kinds rate, which is the base price of moving a loaded box from the origin port to the discharge port. The top layer is the surcharge stack, and in this filing the named piece of that stack is the peak season surcharge. Maersk has quoted its surcharge by box size: 600 on a 20ft, 1,200 on a 40ft. Look at the ratio straight away. 1,200 is exactly twice 600. That is a per-box-size surcharge, which means a 40ft box carries double the surcharge of a 20ft box. Other filings quote the surcharge per container as a flat amount regardless of size, and that produces completely different consolidation maths from the same headline. The only way to know which one you are holding is to make the carrier state the billing basis in writing.

Now the Maersk all-in number. 3,450 plus 1,200 is 4,650 dollars per 40ft to North Europe. Write 4,650 down, because 4,650 is what goes into your cost sheet and 3,450 is what goes into the press release. The surcharge is 34.8 percent of the base and 25.8 percent of the all-in. If your finance team has been budgeting off the 3,450 headline, they are short by 1,200 dollars a box, which is 34.8 percent of the number in the plan. Assume you run 40 boxes of 40ft a month to North Europe. The monthly miss is 48,000 dollars. Across a quarter it is 144,000 dollars. Across a year it is 576,000 dollars. None of that needed a new fact. It needed somebody to read two lines of the announcement instead of one.

The 20ft side of the Maersk filing has a hole in it and I would rather name the hole than fill it with a guess. I have the 20ft surcharge, 600 dollars. I do not have the 20ft Freight All Kinds rate, because the filing I am working from gives the 40ft base only. So I cannot give you a 20ft all-in and I am not going to invent a base rate to produce one. What I can give you is the shape of the answer. Whatever the 20ft base turns out to be, add 600 dollars to it. If that base is not materially below half of 3,450, then the 20ft box is the expensive way to move cargo on this lane and you should be consolidating into 40fts. Get the 20ft base on paper before you quote a single customer on it.

MSC is the harder read. I have two base rates, 5,400 to North Europe and 5,800 to the West Mediterranean, and no surcharge figure at all. Absence is not zero. It means my MSC all-in is a floor, not an estimate. On the face of the filing, MSC North Europe is 5,400 against a Maersk all-in of 4,650, so MSC looks 750 dollars dearer, or 16.1 percent. That comparison is not like for like, though, because one side carries a disclosed surcharge and the other carries a surcharge I have not seen yet. Assume, and say out loud that it is an assumption, that MSC files a peak season surcharge in the same shape as Maersk's, 1,200 on a 40ft. MSC North Europe all-in becomes 6,600 and the gap reopens to 1,950 dollars, which is 41.9 percent above the Maersk all-in. Both readings are honest. Only one of them will be true on 1 June, and the distance between them is 1,200 dollars a box.

This is why I refuse to compare carrier announcements headline to headline. I compare them all-in, and where the all-in is not available I write the gap down as an open item with a number attached rather than quietly taking the flattering version. On 1 June, pull the actual invoices from both carriers for one representative shipment on the same lane, in the same week, in the same box size, and put the two totals side by side. Twenty minutes of work, and it settles the argument for the rest of the quarter.

The Mediterranean figure deserves its own line. MSC West Med at 5,800 against MSC North Europe at 5,400 is a 400 dollar premium, 7.4 percent, for discharging into the Med rather than the north. If your Mediterranean volume is discretionary, or if it is cargo that could equally land at a North Europe gateway and move overland, 400 dollars per 40ft is your comparison figure. Assume 15 boxes a month into the Med. The premium is 6,000 dollars a month and 72,000 dollars a year. Put that next to the cost of the inland leg from a northern port before you decide, because on some cargo the overland leg costs more than 400 dollars a box and the answer flips straight back.

Now the effective date, which is where a lot of people lose money without noticing it happen. 1 June, announced 5 May, 27 days. The question that decides whether your June cargo pays the new money is not what the announcement says. It is what date the carrier keys the surcharge to. There are three candidates in common use: the date you place the booking, the date the vessel sails, and the date the bill of lading is issued. Each one produces a different invoice for the same physical box. A 40ft you book on 20 May for a 10 June sailing is old money under a booking-date rule and new money under a sailing-date rule. On the Maersk structure that is 1,200 dollars a box of difference.

Let us run the pull-forward calculation, because 27 days is enough runway to act on. Assume you have 20 boxes of 40ft planned to sail in the first two weeks of June. Assume the surcharge keys off the sailing date, and assume you can get the space. Move those 20 boxes onto sailings before 1 June and you avoid 20 times 1,200, which is 24,000 dollars. Now price the cost of doing it. Cargo that lands earlier either sits in destination inventory longer or forces you to pull the stuffing date forward. Assume 30 days of transit on Asia to North Europe, which is my assumption and not a carrier commitment, and assume your carrying cost on landed inventory is 8 percent a year on goods value. If those 20 boxes carry 400,000 dollars of goods, roughly 20 days of extra holding is about 1,750 dollars. Against 24,000 dollars of surcharge avoided, the pull-forward wins by a wide margin on this example.

Two caveats on that calculation and they matter more than the calculation. The pull-forward only works if the surcharge is keyed to the sailing date. Under a booking-date rule, moving the sailing changes nothing and you have paid for expedited stuffing to save nothing at all. And it only works if you can get the space, because the fortnight immediately before a filed increase is exactly the fortnight when space is tightest. So confirm the trigger date in writing first, chase the space second, in that order, and do not tell your customer the goods are arriving early until the booking is confirmed.

Per cubic metre is the view that cuts through box sizes and it tells you something useful here. Assume a 40ft carries 67 usable cubic metres and a 20ft carries 33. Maersk's surcharge is 1,200 over 67, which is 17.91 dollars per cubic metre, and 600 over 33, which is 18.18 dollars per cubic metre. Those two numbers are within 1.5 percent of each other. So the peak season surcharge is effectively neutral to box size on this filing. You cannot dodge it by consolidating, because you pay in proportion to the space you take. What you can work on is the base rate, because the base rate is quoted per box and not per cubic metre. Every consolidation decision on this lane is therefore a decision about the 3,450, not about the 1,200.

The justification is worth thirty seconds of your time, because it tells you how the surcharge will behave after 1 June. Both carriers cited strong peak season demand and higher bunker and terminal costs. Demand is cyclical and bunker is volatile, and both of those go down as well as up. A peak season surcharge does not. It is filed as a flat amount for a stated season and it comes off when the carrier says it comes off, not when the fuel price falls. So if you are modelling the second half of the year, do not build a model in which the surcharge tracks bunker. It will not. Model it as a step that stays where it is until you see a filing that removes it, and put a diary reminder on the date the carrier says the season ends.

There is a second question buried in that justification and it is worth asking the carrier directly. If bunker cost is the reason for the increase, ask whether a bunker element is already being billed as a separate line on the same invoice. When the justification and a separate charge point at the same cost, you are looking at two charges for one input, and it is a fair question to put in writing. Same for terminal costs: ask whether terminal handling is already a separate line, and whether it is going up as well. The filing does not say, and the answer changes your all-in.

Contract or spot is the decision sitting underneath all of this, and the filing hands you a clean way to think about it. A contract rate with a surcharge pass-through clause gives you a stable base and a moving top layer, which is the worst of both worlds in a rising-surcharge season. A contract with a named and capped surcharge schedule gives you an all-in number you can quote to a customer for six months. Spot gives you the market in both directions. The decision point is not which is cheaper today. It is how much you ship between June and August and how much variance your margin can carry.

Assume 40 boxes of 40ft a month to North Europe across June, July and August, so 120 boxes for the quarter. At the Maersk all-in of 4,650 that is 558,000 dollars of freight if nothing moves at all. Now assume, strictly as a stress case and not as a forecast, that a further 400 dollars per 40ft gets filed at some point in July. The back half of your quarter costs you 120 times 400, which is 48,000 dollars, and if you have already sold the goods at a fixed price to your customer, that 48,000 comes straight off gross margin. A contract that caps the surcharge stack at the June level is worth up to 48,000 dollars on this example. It is only worth that if the cap is real, which means written into the agreement with a named list of surcharges that are included and a stated treatment for anything not on the list.

My lock line on this one is the Maersk all-in. 4,650 dollars per 40ft to North Europe, disclosed surcharge included. Put that number on the wall. If your all-in spot quote on that lane crosses 4,650 and stays above it for two consecutive weeks, stop quoting spot on that lane and move the volume onto a fixed-rate agreement or a mini-term with a written surcharge cap. If it sits below 4,650, stay on spot and review weekly. The line is set at the all-in and not at the 3,450 headline on purpose: the headline is the number that will fool your finance team, and the all-in is the number that will hit your bank account.

The traps, because I have watched most of them land on somebody's invoice. A surcharge quoted per container rather than per box size looks cheap on a 40ft and expensive on a 20ft, and the same filed number produces two different per-cubic-metre costs depending on how you load. A filing that says 1 June without saying which date triggers it leaves you arguing with an invoice six weeks later, and you will lose that argument because the carrier wrote the rule. A rate quoted to you on the telephone and never put on a written quote sheet is not a rate, it is a conversation. A contract that adopts carrier surcharges by reference will pick this PSS up automatically unless the clause says otherwise. Free time at destination, the demurrage and detention billing basis, and who pays for empty repositioning are all separate lines, and none of them appear anywhere in this announcement.

There is also what is not in the filing. The announcement covers Asia outbound to Europe and the transpacific. I have North Europe and West Mediterranean numbers. I do not have transpacific numbers, and I am not going to derive them by scaling the European figures, because the two trades do not move together and a guess that turns into a customer quote is how people get hurt. If you ship transpacific, ask for the transpacific filing specifically and price it on its own numbers.

What I would do this week, in this order. Get the trigger date in writing from every carrier you use on these lanes. Get the 20ft base rate from Maersk in writing. Ask MSC directly whether a peak season surcharge is being filed alongside the Freight All Kinds rates and, if so, at what amount and on what billing basis. Rebuild the June cost sheet on all-in numbers rather than headline numbers. List every booking with an estimated sailing date between 25 May and 15 June and price each one under both trigger readings. Then decide on the pull-forward, because that one has a hard deadline attached and the others do not.

One more thing about the word coordinated. When two carriers file on the same day with the same justification, the usual expectation is that another one follows within a fortnight. I am not going to name a carrier, because I have not seen a filing. What I will say is that a watch is cheap. On 15 May and again on 22 May, spend ten minutes checking whether anybody else on your lanes has filed for June. If somebody has, redo the all-in comparison that day rather than at the end of the month, when the bookings are already made.

One practical tool that stops this class of mistake repeating. Build a two-line quote sheet and refuse to accept anything else. Line one is the base Freight All Kinds rate, by box size. Line two is every surcharge, each on its own row, with the amount and the billing basis: per 20ft, per 40ft, per container, per bill of lading, per cubic metre, or as a percentage of freight. Then a third row you calculate yourself, which is the all-in total. If a carrier will not give you those three rows, you do not have a quote, you have a number somebody said. On a filing where the disclosed surcharge alone is 34.8 percent of the base, a quote without the second row is not worth the paper.

Then look at your own sales contracts, because this is where the 1,200 dollars either stops or keeps travelling. If you have sold goods at a fixed delivered price for June, July and August, the surcharge sits on your margin. If your contracts carry a freight adjustment clause, check three things: which index or which carrier tariff it points at, how often it resets, and whether it has a collar. On the volumes I used above, 40 boxes a month at 1,200 dollars of surcharge is 48,000 dollars a month, and a clause that resets quarterly rather than monthly leaves you funding the gap in between. If your contracts have no freight clause at all, the decision you have to make this week is whether to renegotiate them or to absorb the number, and absorbing it silently is the option I have seen cost people the most.

There is a review cadence worth setting up while you are at it, and it is cheap. Once a week, on the same day, pull the all-in spot quote for your top three lanes from two carriers, in the same box size, and write the two numbers in one line on a spreadsheet. Six numbers a week. After four weeks you have a trend line that tells you whether 4,650 is a ceiling or a waypoint, and after eight weeks you can tell whether the peak season surcharge is being extended or withdrawn. Most people do this retrospectively in September, from invoices, when the bookings are already made and the money is already spent.

Peak season has an end date printed on somebody's calendar. Your surcharge does not come with one printed on the invoice, which is either an oversight or a business model.

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— By Vivian Zhao