Long-term contracted ocean freight rates for carriers continue their downward trend throughout September
Although the decline, disclosed in the latest XSI Public Indices report from Oslo-based Xeneta, is only 0.1% globally, it comes against a backdrop of increasing overcapacity, widespread blanked sailings and ongoing concern over US-China relations, adding to industry uncertainty.
According to Xeneta’s indices which uses crowd-sourced shipping data covering over 160,000 port-to-port pairings with over 110M data points, long-term rates have followed a pattern of decline since Q3 2018, excluding an unexpected rise in May.
Xeneta chief execuive Patrik Berglund said “There are a number of factors creating unease. “Some are of the industry’s own making, while others certainly are not. For example we have Evergreen pushing ahead with an order for 10 23,000-TEU vessels in a market that is already awash with overcapacity (hence the growing phenomenon of blanked sailings). This is understandable when The Ocean Alliance, of which it is a member, wants to challenge 2M for ULCS strength – and therefore economies of scale – in an ultra competitive market, but it does not help rebalance the supply-demand scales.”
He continues “Then we have the ongoing saga that is the trade war. The US recently announced a delay in its next wave of tariff increases, but there is no certainty of what comes next for industry players. For example, will be there be more front-loading of cargo to avoid further tariffs – bolstering demand and rates – or has the necessary stockpiling already transpired? And of course we have the IMO regulated move to more expensive 0.5% low sulphur fuel oil for 2020. This will have obvious bottom line ramifications.
“It is, without doubt, a high pressure situation for carriers at present. But, as we have seen in the past in this dynamic sector, things can change very quickly.”
In terms of September’s activity, the XSI Public Indices shows mixed regional fortunes.
The European import benchmark recovered some of the ground lost last month, when it fell 1.4%, increasing by 0.2%. However, the export index declined by 1.1%. Nevertheless, European exports remain 4.2% up year-on-year and are up 3.5% since the end of 2018.
Imports on the Far East XSI registered their third consecutive month of declines, falling by 0.8%, but the export index showed signs of improvement, edging up by 0.3%. It has now risen by 5.1% since the end of 2018.
Developments in the US were contrasting, with the import benchmark rising by 0.3% and the export figure falling by the same margin. Both benchmarks are up year-on-year however, with imports up 20.3% and exports rising 3.7% against September 2018.