Oslo-based Xeneta, the leading ocean freight rate benchmarking and market analytics platform, has revealed a jump in long-term contracted rates for containership operators during the month of May, as 2018 rates expire and new contracts push the index upwards.
According to the latest XSI® Public Indices report – based on crowd-sourced data covering over 160,000 port-to-port pairings, with 110 million data points – global rates leapt by 11.5% across the month, with US rates for imports climbing by close to 20%.
The increase follows on from a dire April for contracted liner business, with the indices at that point slumping by 4.2% (after two months of increases). It all goes to show, according to Xeneta CEO Patrik Berglund, the increasingly ‘topsy turvy’ nature of the freight rates landscape.
“May’s XSI public index sees an increase based on what was contracted in April. We’d already started seeing contracts populating the platform at higher levels than last year at that point, particularly for the Trans-Pacific, and that has helped propel this increase,” he comments, adding that the sharp rise has taken the indices to its highest point since its inception in 2017. “This is the largest single monthly gain for the benchmark and puts it 11.7% up year-on-year, with a rise of 7.5% since the start of 2019,” Mr Berglund says.
Arguably the most eye-catching change was an 18.8% month-on-month increase in the US import index, while exports climbed by a more modest 1.5%. This figure was mirrored by a 1.7% rise in the European import benchmark, whereas exports grew by a more noteworthy 6.7%, notably on Europe to US and Brazil trades. Interestingly the Far East import index bucked the trend, declining by a significant 14.2% (leaving it 17.2% down year-on-year). However, the regional export figure jumped by what Berglund calls a “massive” 15.9%.
It is, the Xeneta CEO points out, an increasingly complex picture, with a multitude of factors constantly redefining developments. Nevertheless, one issue, he states, looms large across the segment:
“The China-US trade war. The factors feeding into the industry are too manifold, too interweaved, to identify one all consuming ‘culprit’, but it’s clear that the tit-for-tat tariffs that are being levied by the world’s two largest economies are influencing the world’s number one mode of transporting goods.”
Berglund continues: “Front loading due to the tariff scare raised short-term rates making it a favorable seller market, but now rates have started dropping again. As those rates dropped, BCOs and carriers settled long-term contracted rates on the back of an artificially healthy short-term market.
“The clear winners for the Trans-Pacific contract season are the shippers who have held off concluding their negotiations, as well as carriers, who on the flip side grasped on to early contract conclusions. Unfortunately, buyers who settled contracts early on, or mid trans-Pacific contract season, will not reap the benefits as the dust settles from the short-term market.”
However, Berglund says, the increased costs related to the tariffs may have a longer-term impact on demand, meaning the positive development might be short-lived. And moving away from the two superpowers there remains serious questions relating to the impact of Brexit, not to mention on-going uncertainty over a number of broader socio-economic and geo-political issues.
“It’s getting harder and harder to make accurate predictions concerning freight rate developments, and more and more important to keep abreast of the very latest segment intelligence,” he concludes. “ By monitoring the market closely all stakeholders can negotiate from a position of informed authority, getting the optimal value for their assets and cargoes. Without that insight it’s all too easy to get left behind.
“Stay informed, stay ahead. That’s my advice. It’s the most anyone can do in this rapidly changing environment.”
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.