2020 March 31
Long-term ocean freight rates are currently standing firm in the midst of growing global Coronavirus concern, despite widespread ramifications for the container ship segment as a whole. According to the the latest XSI® Public Indices report from Xeneta, which provides unique market intelligence based on real-time crowd-sourced data from leading shippers, rates rose by 0.5% – the fourth consecutive month of increases. The global index now stands 6.8% up year on year, and 2.8% up since the start of 2020.
The XSI® provides unique insight into the very latest market moves, utilising over 160 million data points, covering more than 160,000 port-to-port pairings, to ‘take the temperature’ of the global industry. That, in line with snowballing concerns over the virus, appears to be rising.
“The shipping industry, like much of the rest of society, has been rocked by Coronavirus,” states Xeneta CEO Patrik Berglund. “It is operating as a major disruptive force, derailing supply chains and impacting on both exports and imports across the board. Reports suggest that vessels leaving China have been sailing with utilization rates of less than 20%, despite the fact that a huge amount of tonnage has been removed from the market. Maersk alone reported it had dropped more than 50 sailings from Chinese ports since late January. A huge amount of business has been lost.”
He continues: “A complex range of factors – including quarantine times, a lack of workers at key ports and throughout supply chains, and travel restrictions – are working as one to disrupt the status quo, causing severe issues for those reliant on the supply of goods from China. Uncertainty reigns supreme, making it more essential than ever for stakeholders to keep right up to speed with the latest market intelligence when discussing ocean freight contracts, especially as we’re now in the trans-Pacific negotiation period.”
Spot the trend
In the spot market, Berglund adds that Xeneta’s platform is reporting a decrease of 20-25% since the start of the year in the market average rate for a 40 foot container from China to North Europe and China to the US West coast. He says this may be indicative of future moves in the long-term market, explaining:
“It’s often the case that the long-term market follows short-term price movements. In that respect we anticipate that long-term rates will also begin to decrease in March. In fact, we already have some reports of slight decreases in the negotiated contracts coming into our platform from our leading global shippers.”
So far, so resilient
Nevertheless, despite the virus shockwaves, the XSI® itself has retained its upward trajectory through February, albeit only just, slowly extinguishing memories of an extended rates decline that stretched, almost unbroken, from summer 2018 through to October 2019.
The general trend for the month was positive but mixed, with distinct fluctuations from region to region. In Europe both import and export benchmarks showed positive development, with imports climbing by 1.8% (a 7% year-on-year increase) and exports rising by 1.5% (a 7.6% jump compared to February 2019).
However, both Far East indices fell, but not significantly considering the scale of the current health crisis (to give some perspective, a recent Moody’s report suggested the number of port calls to Shanghai and Yangshang fell away by 17% year-on-year in week seven). Far East imports on the XSI® declined by 1.9%, while exports fell just 0.5%. Nevertheless, both indices are up since the start of 2020, imports by 3% and exports by 4%.
The picture in the US was flat to negative, with the import index edging down by 0.3% and exports falling by 1.3%. The import benchmark remains robustly positive year-on-year however – up some 21%, mainly due to a strong performance in May 2019 – while exports are up 6.7% compared to February last year.
“It’s another interesting, unpredictable and very serious time for the industry,” concludes Berglund. “Just when relations between the US and China appeared to be thawing, suggesting a break in the clouds for global trade, the Coronavirus hits and long-established, seemingly robust supply chains collapse in on themselves.
“The disruption now may well lead to liners working over-time, and charging for it accordingly, when the dust settles, but who can tell when, or if, that will definitely happen.
Nothing is certain, so everyone with an interest in the ocean freight chain – from shippers, to forwarders, to the liners themselves – must stay informed, nimble and ready to move on intelligence to obtain optimal value for their businesses. Real-time rate data is is a vital resource in this climate, as transportation mode shifting, manufacturing/distribution center location optimization and supplier stratification is top of mind for most supply chain leaders.”
Xeneta’s XSI® Public Indices is based on crowd-sourced rates data from leading global shippers. Companies participating in the platform include names such as Electrolux, Continental, Unilever, Lenovo, Nestle, L’Oréal, and Thyssenkrupp, amongst others.