Xeneta container rates alert: carrier strategies struggle to bear fruit as rates fall and trade continues to decline at Western US ports
Despite the best efforts of individual carriers to buoy long-term contracted ocean freight rates, the market remains on a downward trajectory, with global rates falling by 0.3% through August. The figures, revealed in the latest XSI® Public Indices report from Oslo-based Xeneta, continue a pattern of decline that, with the exception of an unexpected rates rise in May, has been on-going since summer 2018.
Xeneta, the leading ocean freight rate benchmarking and market analytics platform, compiles its monthly XSI® from the very latest crowd-sourced shipping data, covering over 160,000 port-to-port pairings, with over 110 million data points. As such it provides a unique real-time picture of ocean freight rate developments, in an otherwise unpredictable and dynamic marketplace.
That marketplace is, according to Xeneta CEO Patrik Berglund, a tough one for carriers at present.
“The index has now fallen by 2.7% since that upwards surge in May and the carriers, despite their best efforts, are struggling to alter that course,” he comments.
Berglund points to the Far East-North Europe trade where higher rates at the start of August have turned into reductions from 1 September, despite carriers ‘blanking’ sailings to support them (in all some 150,000 TEU was withdrawn from the market during the peak season of July/early August). As such the rise of 5.7% in the European import benchmark in July has been followed in August by a 1.4% slump. Exports posted a small increase of 0.6%.
The US-China trade war is also continuing to hit the industry, with ports on the US West Coast reporting a substantial decline in both import and export volumes in July due to, as Berglund puts it, “the tit-for-tat measures being inflicted on both sides.” This lack of demand is obviously, the Xeneta CEO opines, impacting on carrier rates. August saw a month-on-month decline of 2.6% for the exports index, while imports edged into the positive with a 0.1% rise.
Far East imports on the XSI® failed to break free from an established pattern that has seen the benchmark fall by 17.1% year-on-year, although the 0.1% decline of August was at least marginal. Exports fared better for the period, rallying by 1% after a 4.8% decline the previous month.
Despite the overall lack of positive developments, Berglund warns against taking a simplistic view of a segment that remains notoriously difficult to read.
“Although the news is not necessarily good for the carrier community as a whole, we should avoid painting everyone with the same brush,” he cautions. “If we assess individual carrier performance we see diverging fortunes. For example, Maersk Group reported an underlying net profit of $134m for the second quarter, representing a substantial increase on the $15m reported in the same period last year. Hapag-Lloyd has also performed well, reporting a net profit of $56m off the back of average revenue of $1,071 per TEU, compared with Maersk’s $934. These are good results.
“Unfortunately, at the other end of the spectrum HMM has continued to bleed cash, posting a loss of $88m, despite a jump in revenues and volumes of 11% for the past three months. So, it’s clear to see that individual businesses are coping with the tough market with widely varying success, or lack of it.
“In the same way individual trades are displaying different fortunes, so it’s imperative for all players in the freight value chain to keep an eye on the market and digest the latest intelligence. That’s really the only way to get the best value in rate negotiations.”
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.