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  June 30th, 2016 | Written by

Far East–North Europe Freight Rates are Recovering

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  • Xeneta: “The market is starting to look a little better for carriers as we enter the third quarter.”
  • Short term rates for the Far East-to-North European ports have risen by 99 percent since their March lows.
  • Xeneta sees long-term contract rates rising and holding steady through September on Far East-to-North Europe lane.

The container shipping market is staging a small recovery, with short-term rates rising, suggesting long-term costs could soon follow suit.

This may be positive news for carriers, but it does pose risks for shippers, noted Xeneta CEO Patrik Berglund.

The Oslo-based Xeneta, a benchmarking and market intelligence platform for containerized ocean freight, crowd sources shipping data from over 600 major international businesses. This provides a real-time window into prices on over 60,000 port-to-port pairings, on all main global trade corridors.

It’s a market overview that is, according to Berglund, evolving fast.

“There were some declines in average prices for shipping 40-foot containers through May,” he said, “but generally speaking the market is starting to look a little better for the carriers as we enter the third quarter.”

Short term rates for the main Far East-to-North European ports have now risen by 99 percent since their March lows, according to Berglund, when the market average price for a 40-foot container stood at $552. The average rate as of May 31 was $1102.

“Looking into our data for future long-term contracted rates we can see that they will rise to $1014 in early July, and hold steady at $1015 through to September,” said Berglund. “This is a rise of seven percent from the end of May.”

The pattern on the world’s number-one route suggests a fairly clear development curve to Berglund, and his team of analysts at Xeneta.

“Based on the wealth of historical data we have on the Xeneta platform, we can see that short-term rates are always the first to go up or down, with long-term rates following their lead,” he said. “This raises an interesting question for shippers: should they take advantage of long-term agreements now and lock in rates while they’re still low?”

The obvious answer may be yes, but there are potentially serious risks involved, Berglund noted. “When container prices now begin to rise, those that have been booked in at a lower price may be shunted down the pecking order in favor of those that have agreed the new, higher rates,” he said. “This phenomenon of short shipping is nothing new in the container market, with the carriers, who have been experiencing very difficult times, obviously keen to maximize the returns on each box. The danger of having cargo left at the quayside, and therefore losing sales is a worst-nightmare scenario for a retailer, or any company that ships in large volumes.”

Berglund said that the fluctuations in the market, and the risks they pose to both container carriers and their customers, are adding to the instability of a sector that is currently defined by a fight for survival.

“We need more transparency of rates,” he argued. “Big data software platforms such as Xeneta, which knows the industry inside out, deliver that, giving shippers, freight forwarders and carriers the data they need to get the right price for their cargoes. We believe that same data could be used to turn container shipping into a commodity, with fair prices set on an exchange. This would allow shippers to lock in prices, while carriers could get the assured revenues they need to run sustainable businesses.”