- As the 2020 began, and small changes are visible, 2020 cost fear still looks.
- Small freight increases aren’t showing promise for recovering costs.
- Commoditised market routes difficulties remain.
- The main recovering effect is due to demand and supply balance.
- With transpacific Negotiation beginning now is the time carriers will attempt to recover costs.
According to Patrol Berglund of Xeneta, with declining rates prevailing since mid-2018, carriers are yet to find the right formula for recouping the cost of more expensive fuel, writes Riviera Maritime Media’s Rebecca Moore.
There are indeed concerns whether IMO2020 costs can be recovered.
Third Consecutive Rate Increase
Its latest XSI Public Indices report reveals the long-term contracted market has experienced a third consecutive month of increases, equating to an 8% overall year-on-year rise. However, despite the slight positive market developments, concerns remain over the carriers’ abilities to recover the costs of compliance with the new IMO 2020 low-sulphur fuel regulations.
The XSI, which provides market intelligence based on real-time crowd-sourced shipping data, has tracked a “difficult 18 months for the industry”, with an overall trend of declining rates prevailing since mid-2018. However, based on the 160M data points utilised by the report, that pattern has reversed only a small amount, with December’s 0.9% rise being consolidated by a 2.2% increase in January.
Small Increases So Far
Xeneta chief executive Patrik Berglund said “The small increases are nothing to write home about. We have been tracking the effects of the new regulation in our data. Like market commentators have so far suggested, our rate data does not show IMO 2020 having had any significant impact in the rate levels so far. The carriers are yet to find the right formula for recouping the cost of more expensive fuel.
Commoditised Routes The Real Difficulty?
“They face real difficulties on commoditised routes, where pricing is critical to achieve market share, and the slight rises we see are mainly because of basic supply and demand, nothing more.”
Transpacific Negotiation Period
He added “The transpacific is entering its negotiation period, and this is where it can get interesting for the industry. We would expect to see carriers take off the gloves and bullishly attempt to reclaim the new regulation costs during the Q2 contract period, if indeed fuel regulations have a true impact on long-term market rates. It remains to be seen and it is more important than ever to stay informed – not listen to rumours – but check the facts.”
Uncertainty Ahead
He noted “It is far too early to say with any certainty which way the market will move in the next few months, just as it is also remiss to suggest that three months of increases in the XSI means we have a new long-term rates development trend in place. We do not.”
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Source: Riviera Maritime Media
