- Uncertain outlook as ocean freight rates fall and carriers respond.
- Rates fell for the second consecutive month as the ramifications of coronavirus continue to impact the global economy.
- Based on crowd-sourced data from leading shippers, Xeneta reports that rates are now down over one percent year-over-year.
The outlook for long-term contracted ocean freight rates continues to look weak based on data from the shipping industry and economic forecasts according to the latest XSI Public Indices report from Oslo-based Xeneta, reports the Maritime Executive.
According to the report, rates fell for the second consecutive month as the ramifications of coronavirus continue to impact the global economy.
Freight rates still down
Based on crowd-sourced data from leading shippers, and an analysis of data covering more than 160,000 port-to-port pairings, Xeneta reports that rates are now down over one percent year-over-year.
Although levels remain historically high, according to Xeneta the carrier segment has now seen a 0.2% decline since the beginning of 2020, after four consecutive months of increases through to February. June saw a steep decline (1.8%) coming after May’s decline (1.2%) and providing little assurance for carriers.
“Container ship owners and operators have been working overtime for months to balance supply and demand, removing tonnage, adjusting routes, and constantly reviewing strategy to protect their all-important rates,” says Xeneta CEO Patrik Berglund.
He added, “To their credit, it’s worked very well in these tumultuous times. What will be key now is can carriers resist the temptation of releasing capacity back into the market in an attempt to win market share. The capacity is there ready to be deployed, but do that too soon, and too rapidly, and the rates could collapse.”
Consumer economies suffer major hit
Berglund pointed to the IMF’s recently lowered forecasts which could produce the greatest drop in global growth since the end of the Second World War. Adding to the concerns is forecasts that the major consumer economies might be even more severely impacted.
“Rates have held fairly firm so far, but it remains to be seen how effectively the carriers can fight against such overwhelming odds, and for how long,” says Berglund. The XSI Public Indices’ regional analysis of major trading routes, similarly pointed to declines in almost all indicators.
- For Europe, Xeneta reports that the import benchmark fell 1.9%, the fourth consecutive monthly decline, while the export figure fared slightly better, slipping just 0.3% in value.
- The US indices suffered sharper falls, with imports dropping by 4.6% while exports declined 3.5% in June. The report highlights that both long-term contracted rate benchmarks have now moved downwards for 2020, although remaining high against historic levels.
- Rates on the Far East corridors however showed improvements with the import figure climbing by 1%. Exports, however, fell just slightly during the same period. Nevertheless, both benchmarks have climbed on a year-to-date basis, with imports surging by 7% and exports increasing a more modest 1.3%.
“Although it’s difficult to shake the pervading sense of economic gloom, the complexity of this dynamic sector means nothing should be taken for granted,” Berglund concludes.
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.
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Source: Maritime Executive
