Containerized Freight Rates on the Path of Recovery?

Image Courtesy: World Shipping Council

The container shipping market is staging a small recovery, with short-term rates for the main Far East Asian to North European ports rising, suggesting long-term costs could soon follow suit, according to Oslo-based benchmarking and market intelligence platform for containerized ocean freight Xeneta.

“There were some declines in average prices for shipping 40′ containers through May but generally speaking the market is starting to look a little better for the carriers as we enter Q3,” Patrick Berglund, Xeneta CEO, said.

According to Xeneta, short term rates for the main Far East Asian to North European ports have now increased by 99 percent since their March lows. The average rate as of 31 May was USD 1,102.

“Looking into our data for future long-term contracted rates we can see that they will rise to USD 1,014 in early July, and hold steady at USD 1,015 through to September. This is a rise of 7% from the end of May,” Berglund said. 

The pattern on the world’s number one route suggests a fairly clear development curve, according to Xeneta.

“Based on the wealth of historical data we have on the Xeneta platform, we can see that short-term rates are always the first to go up or down, with long-term rates following their lead. This raises an interesting question for shippers – should they take advantage of long-term agreements now and lock in rates while they’re still low?” Berglund said.

“On the face of it, you’d say ‘yes’. But there are potentially serious risks involved. When container prices now begin to rise, those that have been booked in at a lower price may be shunted down the pecking order in favour of those that have agreed the new, higher rates,” he added.

This phenomenon of ‘short shipping’ is nothing new in the container market, with the carriers – who have been experiencing very difficult times – obviously keen to maximize the returns on each box.

“The danger of having cargo left at the quayside, and therefore losing sales/breaking the supply chain, is a ‘worst nightmare’ scenario for a retailer, or any company that ships in large volumes,” Xeneta said.

In addition, the fluctuations in the market and the risks they pose to both container carriers and their customers are adding to the instability of the sector that is currently defined by a fight for survival, according to this market intelligence platform.

Finally, Berglund believes that big data software platforms delivering data to shippers, freight forwarders and carriers can be used to turn container shipping into a commodity.

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