Inside Logistics

Container rates steady in May

Only slight decline attributed to blanked sailings which balanced supply with demand


May 28, 2020
by

Ocean container rates held relatively steady in May, showing a 1.2 percent decline.

This follows a 0.7 percent increase in April, leaving the index up 1.7 percent for 2020 so far according to the latest XSI Public Indices report from Xeneta.

Oslo-based Xeneta’s XSI provides intelligence on ocean freight market moves. Based on crowd-sourced data from leading shippers, the report utilizes over 200 million data points, covering more than 160,000 port-to-port pairings, to provide a real-time picture of industry developments.

The unexpected rise in April, after a 0.5 percent fall in March, was attributed to the proactive strategies of containership operators, who were withdrawing market capacity and adjusting sailings in an attempt to balance supply and demand. That approach continues to mitigate damage, while the gradual opening of national economies is, explains Xeneta CEO Patrik Berglund.

Early days

“Given the debilitating effects of the pandemic on global economic activity, there may have been a belief that rates would freefall, but not so,” he comments.

“Owners have been quick to remove surplus capacity and as some, particularly European, countries cautiously reopen we’re seeing carriers, such as those in THE Alliance, announce plans to reinstate sailings.”

Contracted rates have held steady, while spot rates on key routes have also remained strong. Some national governments have stepped in to support the shipping industry – such as those in South Korea and Taiwan, which have both announced emergency funding of US$1 billion.

Fluctuating fortunes

“The future…remains uncertain. That makes it absolutely essential for all stakeholders in the shipping value chain to access the latest intelligence to ensure they stay up to speed and get optimal value when negotiating rates,” Berglund says.

That sense of unpredictability has been evident in the regional developments revealed by Xeneta’s XSI.

In Europe the import benchmark continued its decline, falling (for the third consecutive month) by two percent, down 2.2 percent since the start of the year.

Exports however continued to perform robustly, with rates increasing by 0.8 percent and now 6.1 percent up for the year (5.7 percent year-on-year). Far East imports, meanwhile, surged by 3.9 percent, with the figure up six percent in 2020 to date.  The export index, however, fell 1.4 percent in May, but remains up 1.7 percent for the year, but down 6.1 percent year-on-year.

Both the import and export benchmarks fell in the U.S., with the former declining by 1.5 percent (up 1.8 percent since the start of 2020) while the latter slid by 3.4 percent. It is now just 0.2 percent up for the year, but 1.6 percent up year-on-year.

Positioning for success

“It’s obviously not all doom and gloom for contracted rates, even though the challenges the industry (and indeed the world) face should not be underestimated,” Berglund concludes.

“Owners and operators are clearly up for the fight and moving decisively when and wherever that’s possible. We can see clear evidence of that in the work of the Digital Container Shipping Association (DCSA), made up of the largest carriers, which is looking to introduce a paperless bill of lading and potentially save billions of dollars in costs. A much-needed efficiency.

“Shippers have to stay equally as limber in this environment, keeping up to speed with real-time market developments. Nobody knows what will happen next, but with the insights enabled through the latest data you can at least position your business to gain competitive advantage. That’s more essential now than ever.”

Shippers participating in Xeneta’s crowd-sourced data platform include names such as Electrolux, Continental, Unilever, Lenovo, Nestle, L’Oréal, and Thyssenkrupp, amongst others.