The UK’s decision to leave the European Union will have a negative impact on all parties involved in the container shipping segment, from shippers, to freight forwarders and the container carriers themselves, the market intelligence platform for containerized ocean freight Xeneta said.
“The last thing the container segment needs is further unpredictability and disruption,” Xeneta CEO, Patrik Berglund, said.
Rates for shipping 40-foot containers have effectively collapsed over the past two years, with the short term average for Shanghai to Rotterdam now standing at 60% below its Summer 2014 level, driven by chronic over-capacity and cut throat competition.
For the last 40-plus years the UK has been part of a mega trading block capable of negotiating the most favourable trade treaties, and therefore import duties, with other blocks and nations, but now the country is going to have to sign new treaties with everyone, without the bargaining power of the EU in its corner, according to Berglund, who added that this would “undoubtedly lead to higher duties, and therefore costs for shippers.”
Furthermore, he said that the flow of containers will face a new bottleneck, increasing complexity and potentially forcing shippers to consider alternatives – such as more local sourcing, or re-positioning facilities in territories more conducive to easier trading.
According to Berglund, it is impossible to predict how the decision will impact on freight rates in the immediate future, as the segment was unpredictable enough “before this political bombshell exploded.”