Container Contract Rates Rise in November

The ongoing trend of downward pressure on long-term contracted ocean freight rates appears to have been broken, or at least temporarily derailed, with marginal increases seen across the board in November.

According to the latest XSI Public Indices report from Xeneta, which provides unique business intelligence based on real-time crowd-sourced data from the world’s leading shippers, global rates climbed by 0.9% over the last month. This disrupts a long-term pattern of decline that, with the exception of a sizable and unexpected rise in May, has been ongoing since Summer 2018.

Oslo-based Xeneta’s XSI Public Indices report utilities over 110 million data points, covering over 160,000 port-to-port pairings, to provide unparalleled insight into the very latest market moves. In November, those moves were, according to Xeneta CEO Patrik Berglund, surprisingly positive for the somewhat beleaguered container industry.

“We’ve gotten so used to seeing the arrow pointing downwards over the course of the last year and a half or so that a push ‘into the black’ comes as a minor shock to the system,” he says. “It just goes to show how unpredictable the ocean freight segment remains. With that in mind, it is vital, for all parties in the chain, to stay abreast of the latest intelligence to stand any chance of getting optimal value from contract negotiations.”

Although the index remains 4.0% lower than the high of 116.19 reported in May (currently standing at 111.54 points) it is now up 0.8% year-on-year, and has increased by 3.0% since the end of 2018. And it’s not just the index that’s ‘in the black’.

“The carriers have posted largely positive results for Q3,” Berglund explains, “with the German line Hapag-Lloyd reporting a net profit of $168m – that’s against a profit of just $15m this time last year. Meanwhile, the world’s largest carrier, Maersk, reported a very healthy net profit of $520m. Even Yang Ming’s loss of NTD 1.38bn is not as bad as it seems on the surface, as if options had been exercised on previously chartered vessels they too would be in the black. So, the latest news is not as bad as many will have feared.”

This is reflected in the XSI regional import and export breakdowns, which all registered moves in the right direction. The import and export benchmarks for Europe climbed by 0.2% and 0.6% respectively, while shipowners will have been further buoyed by a draft paper from the European Commission suggesting the EU Consortia Block Exemption Regulation (BER) will be extended until 25 April 2024 (this allows carriers to participate in alliances with a market share of up to 30% on EU trades).

In the Far East the XSI import index showed a 1.2% increase (although it remains down 16.5% year-on-year) with exports rising by 0.5%. US imports climbed by 1.4%, boosting a trend that has driven a 27.3% increase since April this year, with exports registering a 1.5% rise.

Although all the key indicators are moving upwards Berglund warns that, as ever in the unpredictable ocean freight sector, nothing can be taken for granted.

“World trade, and this segment is at the vanguard of that, still faces uncertainty on a number of fronts, and that obviously impacts upon the demand-rates dynamic,” he comments. “For example, there’s been no noticeable trade negotiation developments between the US and China and I’m not sure anyone really knows what’s in store next. Reports suggest that the tit-for-tat ‘war’ they’ve become embroiled in will contribute to the first full-year decline in volumes on the Eastbound transpacific trade since the depths of the global financial crisis in 2009. The carriers are feeling that pain.

“Furthermore, there’s ongoing wider economic and geopolitical concerns, mixing with serious single issues such as Brexit – with the next season of this ongoing drama due to hit our screens after the UK general election in December. When we add in the carriers’ attempts to formulate strategies to claw back the additional cost of low Sulfur fuels to comply with IMO 2020, well… further uncertainty reigns.”

Berglund concludes: “Although the sector is always changing, our message stays the same – keep up to date with the very latest market intelligence to get maximum value for you and your stakeholders. As November’s developments illustrate, there’s no such thing as business as usual in the ocean freight segment.”

Xeneta’s XSI Public Indices is based on crowd-sourced rates data from leading large-volume global shippers. Companies participating in the platform include names such as Electrolux, Continental, Unilever, Lenovo, Nestle, L’Oréal, and Thyssenkrupp, amongst others.