LCL market developed effectively due to record high container freight rates

In the past, NVOCCs and LCL forwarders sometimes needed only half a container full. However, with rates now hitting all-time records, those days are over.

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LCL - Retail container cargo by sea (Photo: Phaata)

LCL freight forwarders gathered at a luxury London hotel over the weekend, at the annual conference at the London Freight Club, to argue that freight rates Increased shipping has forced NVOCCs to ensure they have enough stock to fill containers.

In the past, NVOCCs and LCL freight forwarders sometimes only pushed half a container, because shipping costs were so low the impact was minimal. However, with rates now hitting all-time records, those days are over.

A freight forwarder shared: “We can’t afford to send out boxes with just a half or part load any more.” “In the past if you needed to get freight out of the door you might not fill the container so that you could make sure your customer’s cargo arrived on time,” he said.

Now, although the freight rate for LCL has also increased in line with the freight rate of full container (FCL), from about $50 per cubic meter to $300-350 per cubic meter , it is important to fully load the containers to ensure that all shipping costs are covered.

However, the forwarders at the freight club have been upfront about their profits due to the booming market. One company told The Loadstar, "My income has increased by 700-800% over the last 18 months, and that’s on around 15% less cargo overall."

Freight rates in the NVOCC and forwarding marketplace are effectively controlled by the asset owners, which are the shipping lines, so forwarders are monitoring the market, looking for signs of change.

In particular, forwarding companies want to see how shipping lines respond to any drop in demand, whether they maintain rates at a favorable level, or return to the way they were before and compete for market share with each others in the race to drag freight rates to the bottom or not.

“If rates return to the pre-pandemic levels I will close the business, but rates are high. For the first time people were beginning to realise what the forwarding industry does."

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