Xeneta can imagine ocean freight at 2014 levels

According to the platform for benchmarking ocean freight rates, big overcapacity remains the biggest risk

Xeneta can imagine ocean freight at 2014 levels

Xeneta’s experts see the first signs of a recovery in the market when looking at the firgures after the Chinese New Year (CNY). In 2016 (with the CNY starting in the week from February 22), they saw an average drop of about 29 percent on the China Main ports-North Europe main ports corridor for a 40’ container. This year, two weeks post CNY (week starting February 13) though still a drop, that same corridor saw only an average drop of 11 percent. In the week from 13 to 17 March 2017 they see market average prices at USD 1,601 for this corridor.

The trans-Pacific trade from China’s Main ports to North America’s West Coast ports, post CNY 2016 figures showed an average drop of about 13percent for a 40’ container. This year that same corridor (40’ container) saw only an average drop of 11 percent. However, it should be noted that despite the decline this year, the prices today are still at a higher level than this same time in 2016.

“If we look at the average prices Post CNY from 2014-2017, it’s clear that this year’s ocean freight prices are inching up to 2015 prices. What’s more interesting is that if, and that is a big IF, the market remains as healthy for suppliers, container rates can possibly reach 2014 levels,” says Patrik Berglund, CEO Xeneta.

Citing an example, he refers to the average rate on the market average price in 2014 for a 40’ container on China Main – North Europe, which was USD 2,504. Today, the average rate of the market average price is USD 1,804, and was even USD 1,974. “If this trend continues, the 2015 gap will definitely be covered and we could potentially see the market nearing 2014 prices. But, remember, this is all up for grabs, but never say ‘never’,” Berglund adds.

Europe negotiations were postponed by many companies last year in an attempt to see what the effects of Chinese New Year would be. As many of these contracts are being concluded, Xeneta’s database shows a substantial increase in long-term contract rates (Asia – Europe)  when compared to the same cycle last year.

Despite all the positive signs indicating a market recovery, Patrik Berglund warns against too much optimism. Overcapacity is still an issue that hasn’t been dealt with 100percent even though there are a record number of ships being scrapped. At the same time any new or daring liners who want to make a play in the market, could do so in dropping prices to gain market share.

“All eyes should be on the near future contract negotiations because if any liner starts agreeing low long-term contract prices now, that would be a catalyst to pull down the spot market as well. Then, it could all start all over again and we may relive 2016,” says Berglund.

Xenta AS is by his own account the leading platform for benchmarking ocean freight rates. Their ocean freight rate data is based on more than 23 million contracted rates, reporting on 160.000 port-port pairs. They enable decisions based on sound information and useful market analyses, which can substantially optimise the freight purchase of companies.