In-depth analysis of Q3 container shipping costs, Xenta, global benchmarking and market intelligence platform for containerized ocean freight, reveals positive trends for the beleaguered container carrier segment.
According to Xeneta, which crowd sources shipping data from more t[ds_preview]han 600 major international businesses, covering more than 60,000 port-to-port pairings and over 17 mill. contracted rates, the recent collapse of Hanjin laid the foundations for a trading period like no other.
Hanjin insolvency causes undersupply
Xenta-CEO Patrik Berglund spoke from a »certainly stand-out quarter«. He sees short-term rates on the world’s number one trade route – Far East Asia to North American main ports – sky-rocketed, largely due to Hanjin transforming oversupply to undersupply almost overnight. This enabled significant rate hikes, with the market average price for 40’ containers climbing by 47 % across Q3, starting at 1,240 $ and ending on 1,826 $.
The company already sees that the prices are tending down somewhat. That means that the Hanjin effect is history. According to Xenta’s CEO there is clearly still an issue of structural overcapacity, albeit more balanced now, and that pushes prices down – with risks for both the carriers and BCOs/shippers. Short term rates on the number two route – Far East Asia to North Europe – actually fell by 24 % in Q3.
»That said, this is more of a stabilization, or flattening out, as it should be seen in the context of a longer-term climb. Market averages for 40’ containers hit a low of 662 % in April and had risen to 1,500 $ by the close of September on this route. So, the fall isn’t as serious for carriers as it may seem. However, if it continues that’s another matter. That could bode for a very challenging 2017 for carriers and, therefore, a risky time for shippers who must have predictability in their supply chains,« says Berglund.
Upward trajectory for freight rates
On the plus side for carriers, Xeneta’s CEO notes that reported market low rates have risen spectacularly since Q1, climbing by 258 % from the end of that quarter to the beginning of Q4. That curve stabilized in Q3, but remains on an upward trajectory.
The data and trends are complex, Berglund admits, but the feedback from Xeneta’s network of global shippers is perhaps simpler to decipher. He explains that large volume shippers seeking long-term contracts are reporting carriers aren’t prepared to negotiate near the bottom end of the current market, where many of the older, expiring long- term contracts sit.
Carriers expect the market to pick up
»This should wave a red warning flag to any shipper tendering/bidding for new long-term rates in January, the European norm, and next May, the US standard,« he warns. That makes it clear carriers have an expectation that the market will continue to pick up.
»From our data we can see how much long-term rates have risen through Q2 and Q3. For example, the cost of shipping a 40’ container for the Far East to North Europe route has escalated from a low of 361 $ in April to 965 $ on 30 September, a 168 % increase. With this in mind shippers probably shouldn’t expect the same low price contracts in 2017 as they secured in 2016«, Berglund says.
He adds the caveat that it’s too early to accurately predict the market for 2017 though, citing the unpredictability of a segment that changes almost daily. The Xeneta CEO argues that the only way for both shippers and carriers to keep up with these dynamic developments, and get the best prices for cargoes, is to utilize the latest business intelligence and analytical tools.