Analyst sees freight rates steady but uncertain

Malcolm Latarche

Malcolm Latarche · 29 May 2020

ShipInsight


With the collapse in demand and glut of supply in the container vessel segment, analysts may have been fearing the worst for developments in long-term contracted ocean freight rates. However, despite the widespread ramifications of Coronavirus, rates held comparatively steady for the month of May, with the latest XSI Public Indices report from Xeneta registering a 1.2% decline. This follows a 0.7% increase in April, leaving the index up 1.7% for 2020 so far. That said, the future, Xeneta cautions, remains defined by uncertainty.

Oslo-based Xeneta’s XSI provides unique intelligence on the very latest ocean freight market moves. Based on crowd-sourced data from leading shippers, the report utilises over 200 million data points, covering more than 160,000 port-to-port pairings, to provide a real-time picture of industry developments.

The unexpected rise in April, after a 0.5% fall in March, was attributed to the proactive strategies of container ship operators, who were withdrawing market capacity and adjusting sailings in an attempt to balance supply and demand. That approach continues to mitigate damage, while the gradual opening of national economies is, Xeneta CEO Patrik Berglund explained, giving some room for optimism. “Given the debilitating effects of the pandemic on global economic activity, there may have been a belief that rates would freefall, but not so,” he commented. “Owners have been quick to remove surplus capacity and as some, particularly European, countries cautiously reopen we’re seeing carriers, such as those in THE Alliance, announce plans to reinstate sailings.

“Contracted rates have held up well, some would say surprisingly so, while spot rates on key routes have also stood strong. With some national governments stepping in to support the industry - such as those in South Korea and Taiwan, who have both announced emergency funding of USD 1billion for shipping – a ‘blood bath’ has largely been avoided. Nevertheless, it’s early days and many owners have posted worse than expected Q1 results and, it has to be said, will be dreading going public with Q2 figures.”

“The future, unfortunately, remains uncertain. That makes it absolutely essential for all stakeholders in the shipping value chain to access the latest intelligence to ensure they stay up to speed and get optimal value when negotiating rates.”

That sense of unpredictability has been evident in the regional developments revealed by Xeneta’s XSI. In Europe, the import benchmark continued its decline, falling (for the third consecutive month) by 2%, down 2.2% since the start of the year. Exports however continued to perform robustly, with rates increasing by 0.8% and now 6.1% up for the year (5.7% year-on-year). Far East imports, meanwhile, surged by 3.9%, with the figure up 6% in 2020 to date. A performance that could not be matched by the export index, which fell 1.4% in May, but remains up 1.7% for the year, but down 6.1% year-on-year.

Both the import and export benchmarks fell in the US, with the former declining by 1.5% (up 1.8% since the start of 2020) while the latter slid by 3.4%. It is now just 0.2% up for the year, but 1.6% up year-on-year.

“It’s obviously not all doom and gloom for contracted rates, even though the challenges the industry (and indeed the world) face should not be underestimated,” Berglund concluded. “Owners and operators are clearly up for the fight and moving decisively when and wherever that’s possible. We can see clear evidence of that in the work of the Digital Container Shipping Association (DCSA), made up of the largest carriers, which is looking to introduce a paperless bill of lading and potentially save billions of dollars in costs. A much-needed efficiency.

“Shippers have to stay equally as limber in this environment, keeping up to speed with real-time market developments. Nobody knows what will happen next, but with the insights enabled through the latest data you can at least position your business to gain competitive advantage. That’s more essential now than ever.”

Companies participating in Xeneta’s crowd-sourced data platform include names such as Electrolux, Continental, Unilever, Lenovo, Nestle, L’Oréal, and Thyssenkrupp, amongst others.

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