Tuesday, May 7, 2019

Whilst Shippers May Celebrate Container Rate Fall Vessel Owners Face Problems

Latest Figures Indicate Overcapacity and China Trade War Effect Hitting Hard
Shipping News Feature
NORWAY – WORLDWIDE – Oslo-based Xeneta, the ocean freight rate benchmarking and market analytics platform, has produced its latest XSI® Public Indices report which it says shows that, after two months of steady increases in long-term contracted rates for containership operators, there has now been a reversal of fortunes, with rates falling by 4.2% across the spectrum.

The company produces the monthly XSI® with data gathered from the world’s foremost shippers and freight forwarders with the intent that the current information can help industry stakeholders get optimal value for both assets and cargoes. Xeneta uses crowd-sourced data covering over 160,000 port-to-port pairings, with 110 million data points along all major trading corridors, all of which saw month-on-month declines and plunged the indices to its lowest level since June 2018. Xeneta CEO Patrik Berglund says this currently makes for 'somewhat challenging terrain' for those on the asset owner and operator side, commenting:

“This is a real turn of events. The past two months have seen the industry halt a long-term rates decline and achieve some much needed respite, with rates rises of 2.5% in February and a more modest 0.5% in March. In that context a 4.2% fall comes as a slight shock to the system and will have many in the industry reassessing the short- to medium-term forecasts for their businesses.

“The reasons for the decline are complex, but certainly overcapacity on the European trades (with Ocean Alliance increasing activity and new slots for a standalone HMM service) and continued fallout from the US-China trade war (where shippers initially front loaded cargoes to avoid additional cost) have added to longer term structural issues and political/economic uncertainty.

“In short, suppliers have benefited from a market in flux due to trade wars, IMO, socio-economic factors, like Brexit, and now the situation is turning. As always, uncertain waters may lie ahead for the contract market. Looking ahead it’s difficult to identify obvious breaks in the clouds. Geopolitics remain stubbornly unpredictable, with on-going uncertainty over US-China relations, while no one, not even the people at the very top, appear to have a clear view of what is happening regarding Brexit and its consequences.

”The only advice I can really offer stakeholders on both the supply and demand side is to stay tuned. Keep right up to date with in-depth intelligence on rates and that will allow you to monitor the market, post your negotiations, and be prepared to adjust to and address the latest market situation with your supplier to ensure you get the best possible value for your business. In such an unpredictable sector, with so many variables, that’s really the key to delivering a degree of certainty.”

April’s XSI® Public Indices shows rates figures firmly in the red. European imports fell by 4.8% (2.3% down on year end 2018), while exports declined by 1.9% (2.4% down for the year). For the Far East the import benchmark dropped by 2.1% while exports slumped 3.6%. The export figure has now fallen by 4.5% since the start of the year and 9.7% between July 2018 and April 2019, indicating a prolonged downward rates trend for the segment to contend with.

US trades have suffered the same fate as their counterparts in April, derailing what was beginning to look like a steady upwards trajectory. After two straight months of increases the export benchmark fell by 2% (although it remains 6.4% higher than year end 2018), while the import index dropped by 3.4%. It is now 3.2% down year-on-year.