As trade war hits Asia-US rates, capacity withdrawn on Europe routes

THE XSI Public Indices report from Xeneta, an ocean freight rate benchmarking and market analytics platform, showed that rates dropped by 0

05 August 2019 - 19:00

THE XSI Public Indices report from Xeneta, an ocean freight rate benchmarking and market analytics platform, showed that rates dropped by 0.4 per cent in July, with a notable decline in the Far East export benchmark. By comparison, US exports and European imports performed well.

The global index decreased by 2.4 per cent since its record high in May this year, however, it remains one per cent up in July compared to the same month a year earlier.

XSI provides a real-time picture of ocean freight rate developments, with the report compiled from crowd-sourced shipping data, covering 160,000 port-to-port pairings, with 110 million data points.

'On the face of it a fall of 0.4 per cent is 'nothing to write home about',' said Xeneta CEO Patrik Berglund. 'It is in keeping with an overall trend of mid- to long-term rates decline that we have seen since this time last year, excluding May's unexpected upward surge.

'However, if we get the magnifying glass out and start examining individual corridors, we can see a complex cast of characters playing out an increasingly high stakes game, with the potential for widespread market impact.'

Of particular interest, Mr Berglund observes, is the mounting fallout from the US-China trade war.

The XSI Far East import index dropped by just 0.1 per cent in July, but has fallen by 12.6 per cent since the end of 2018 and 15.5 per cent year on year. The Far East export figure for July decreased by 4.8 per cent. This can be seen in the context of Chinese import and export trade figures for the first half of 2019, showing exports to the US slumped by 8.1 per cent to US$199.4 billion, while imports plummeted by 29.9 per cent to $58.9 billion.

'There is a real impact on volumes here,' the Xeneta CEO said in a company release, 'and that has obvious ramifications upon rates for the Far East trades.

'On the face of it the US indices appear to be enjoying better fortunes - with a 2.9 per cent rise for imports (up 12 per cent year on year) and a 6.6 per cent boost for exports - but look at the updates from major US ports for the first six months of the year and a more telling picture develops.

'For example, import volumes at San Pedro Bay ports declined by 3.3 per cent year on year, while exports through Los Angeles and Long Beach, the key hub for Asia cargoes, are reported to have fallen by 7.1 per cent for the same period. That suggests we are not at a time of 'business as usual' and the container shipping industry has to make adjustments to adapt.'

Such adjustments are already being made in Europe, he notes. Here carriers are taking action to compensate for poor demand-supply fundamentals, with 'blanked sailings' in July and early August set to account for the withdrawal of 150,000 TEU during what is traditionally a peak sailing season.

The XSI European figures reveal a rise in import rates of 5.7 per cent for July (up 3.9 per cent year on year) with a small gain of 0.7 per cent on the exports benchmark (a 1.5 per cent year-on-year increase).


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