Container rates alert: Xeneta tracks slight decline in contracted ocean freight rates for June after ‘mad’ May
After an unexpected leap in long-term contracted ocean freight rates in May, June was a calmer month for the container industry, with a slight decline of 1.7% in global rates. According to the latest XSI® Public Indices report from Xeneta, the leading ocean freight rate benchmarking and market analytics platform, performances were mixed across the major trade corridors, with strong import results for the US and Far East offsetting falls in exports, and across the board In Europe. The index currently stands 7.2% up year-on-year.
May saw an eye-catching 11.5% rates surge, with US container rates for imports climbing by close to 20%. This reversed previous falls on the XSI®- compiled from the very latest crowd-sourced shipping data, covering over 160,000 port-to-port pairings, with 110 million data points – neatly showcasing the constantly fluctuating nature of the global rates landscape.
June’s performance, however, shows something of a return to a ‘pattern’. Or, as Xeneta CEO Patrik Berglund points out, as near to a pattern as the unpredictable segment gets.
“I don’t think any industry commentator could put their hand on their heart and say they expected what happened in May,” he notes, “but I think a few will have predicted this slight ‘correction’ in June.
“Although the XSI® remains 5.4% higher than at the end of 2018, we have seen it shed value in the mid- to long-term, falling by 7.2% between July last year and April 2019. So there is an on-going downward trend, albeit one that can be spectacularly disrupted by swings in demand, as we saw in May. Whether that trend will continue is uncertain, making it all the more crucial for all stakeholders in the chain to keep abreast of the very latest market intelligence to inform rate negotiations. Nothing can be taken for granted in this increasingly dynamic segment.”
As with last month, US imports were the star performer, with a 2.7% month-on-month climb in the benchmark – a small increase, but significant as it maintains the upward trajectory. The US export figure declined by 3.7%. A similar pattern was identified in the Far East, as the import indices rose 2.5% against a 1.4% decline in exports. Both import and export figures fell for Europe, by 1.7% and 0.8% respectively, but the benchmarks remain above the 2018 year-end levels.
Berglund believes the China-US ‘trade war’ is continuing to exert an influence on the market, with the potential front-loading of cargoes to avoid the threat of new tariffs. In addition, upcoming peak season demand and the looming costs of IMO sulfur compliance may bolster short-term prospects for carriers (CMA CGM has nodded to this with an announcement of increased FAK levels on the main Far East-North Europe trade). However, weak spot rates on the Far East Asia – US corridor, aligned to developments such as the Ocean Alliance’s plans to cancel voyages on its Transpacific route due to lack of demand, muddy the picture.
The value of intelligence
It is, as ever, ‘too complex to call’, says Berglund. He notes:
“One of these days I’d love to declare, ‘this will happen on corridor x next month, while trade y will develop in this direction’, but I’m afraid I may be waiting some time.
“The reality is there are too many factors, with too many actors, feeding into the segment to predict with any certainty. Trump’s trade war is an obvious culprit, but even if that were resolved reaching any degree of clarity on long-term fundamentals at present would be challenging. We have Brexit, the future of the EU, wider geopolitics, the carriers themselves, macroeconomics – who can tell how these issues and players will evolve.
“Stay informed of the very latest rate developments and you’ll get the best value for your assets, cargoes and businesses. That’s the only thing any of us can say with any certainty.”
Oslo-based Xeneta provides unique insight into ocean freight rates by crowdsourcing the very latest rates from leading global shippers. The companies feeding data into the unique software platform include names such as Electrolux, Continental, Unilever, Lenovo, Nestle, L’Oreal, and Thyssenkrupp, amongst others.