Xeneta: Container Industry Maintains “Delicate Balancing Act” As Long-Term Ocean Freight Rates Hold Steady

//Xeneta: Container Industry Maintains “Delicate Balancing Act” As Long-Term Ocean Freight Rates Hold Steady

Xeneta: Container Industry Maintains “Delicate Balancing Act” As Long-Term Ocean Freight Rates Hold Steady

According to the latest XSI® Public Indices report from Oslo-based Xeneta, the carrier segment appears to be negotiating the Coronavirus storm with some success, at least in terms of safeguarding its vital long-term ocean freight rates. After two months of slight rate declines – although nowhere near as dramatic as industry observers had feared given the pandemic’s severity – the index crept up 0.1% in July. It is now just 0.1% down through 2020 and 0.8% down year-on-year.

Xeneta CEO Patrik Berglund attributes the relatively minor movements to the proactivity of owners, as they continue to perform a “delicate balancing act” with supply and demand.

Essential reading

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

Over the last few months, the report has been increasingly essential reading for stakeholders throughout the ocean freight value chain, as they seek to understand the ramifications of the pandemic and ensure they achieve optimal value in rate negotiations. Berglund says readers may be surprised by the moderately small adjustments, given the huge economic impact of the virus, but says carriers are constantly moving to ensure rates are protected.

Difficult decisions

“We’ve seen contracted rates holding comparatively steady while spot rates have actually been rising from April and through May and June,” he says, adding: “Given the short- and mid-term macro-economic situation that’s taken many by surprise. The key has been carriers conducting a delicate balancing act to remove tonnage and adjust routes in accordance with demand. However, it’s difficult to maintain that for the long-term and, let’s face it, the virus is not going anywhere fast – so what’s the next step?

“Our latest intelligence shows that spot rates have finally begun to slide on key Far East-North Europe and the Far East – US West Coast trades, suggesting the recent reinstatement of routes and tonnage is driving down prices. That’s obviously a concern for carriers who face a difficult decision: keep reintroducing tonnage and try and gain market share, yet undermine rates, or withhold services and keep propping them up?

“So, don’t let the current minor fluctuations overshadow the major decisions that are being taken behind the scenes.”

Key developments

The XSI® Public Indices’ regional analysis of major trading routes painted a mixed picture for July. After four months of decline, imports on the European XSI® increased by 0.2% (down 2% year-on-year), whereas the export benchmark registered its steepest fall since October with a decline of 2%. That said, it remains 3.4% up year-on-year. Developments in the Far East were negative, with a significant 4.5% fall in import rates and a 1% drop in the export figure. Year-on-year the benchmarks are up 1.6% and down 1.3% respectively.

US figures were varied for the month of July, with imports declining marginally by 0.1% (0.4% down against July 2019) while exports registered a healthy rise of 1.2%, reversing two months of decline. However, despite the increase, the index remains down 3.3% year-on-year and has now shed 2.2% of its value since the end of 2019.

Unlocking understanding

Concluding, the Xeneta CEO surmises: “The carriers have been working flat out on strategy and that has maintained a relatively solid rates course in this most trying of times. However, they can’t control external factors and key indicators are undoubtedly a cause for concern.

“For example, the virus continues to ravage the US and, given the scale of unemployment, demand will remain subdued, creating an impetus to withdraw capacity. Meanwhile, consumer spending has fallen by 1.8% in China (against forecasted growth of 0.5%) and that suggests any recovery may take time. However, it’s also important to note that China reported impressive second-quarter GDP growth of 3.2% year-on-year, beating market expectations, and reversing the decline of 6.8% in Q1.

“So, it’s a highly complex picture, and that creates a real challenge for both carriers to effectively manage rates and shippers to know what they should be paying to gain real value for cargoes. With that in mind, the latest market intelligence is absolutely key. Stay informed to stay ahead – that’s the only sure way forward.”

Companies participating in Xeneta’s crowd-sourced ocean and air freight rate benchmarking and market analytics platform include names such as ABB, Electrolux, Continental, Unilever, Lenovo, Nestle, L’Oréal, and Thyssenkrupp, amongst others.

Source: Hellenic Shipping News Worldwide

By | 2020-07-31T04:14:16+00:00 July 31st, 2020|Uncategorized|0 Comments

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