Box shipping ends year on a high with contracted rates up

XENETA says that the year has ended on a high note for container shipping lines despite the lack of sulphur surcharge transparency stoking market fears

29 December 2019 - 19:00

XENETA says that the year has ended on a high note for container shipping lines despite the lack of sulphur surcharge transparency stoking market fears.

This year has come to a close after two months of increases in long-term contracted ocean freight rates across key trading routes.

According to the latest XSI Public Indices report from Xeneta, which provides market intelligence based on real-time crowd-sourced data from leading shippers, global rates rose 0.9 per cent in December, following a 0.9 per cent rise in November.

Casting a shadow over this positive development, however, is market confusion over IMO 2020-related sulphur surcharges.

Xeneta's indices report that utilises 160 million data points covering 160,000 port-to-port pairings, shows that in December the index increased by four per cent year on year.

'It's clearly been another good month for the liner industry,' said Xeneta CEO Patrik Berglund. 'After the prolonged period of long-term contracted freight rates decline it was certainly needed. The huge spike in May, when rates soared by 11.5 per cent, was an anomaly with prices continuing to fall away after that point.

'So, the moderate rise in November raised hopes that that established trend had been broken, and this increase seems to confirm that?for now.'

In Europe the import index increased 1.7 per cent and is now up 5.2 per cent year on year. Exports, meanwhile, climbed by two per cent, driving the benchmark up 3.7 per cent compared to December 2018. Spot rates on the key Far East-North Europe trade have also been climbing steadily since the end of October.

Staying in the Far East, the XSI import figure rose by 3.8 per cent month on month, but still remains 13.1 per cent below the level reported last December.

Far East exports were up by 0.6 per cent pushing the benchmark up 2.1 per cent. US imports grew by 1.3 per cent and are now up 23.1 per cent year on year. The US export benchmark was the only one to show a negative development in this month's report, with a slight fall of 0.1 per cent. Nevertheless, it remains 9.5 per cent up year on year.

Some shippers report agreeing on fixed rates with baked-in IMO 2020 charges for the first quarter of next year, with these rates actually coming in at a lower level than pre-IMO contracted rates negotiated earlier in 2019. Others have opted for a flexible approach, agreeing on quarterly bunker adjustments, with a 'wait, watch and see' approach, while a further group have adopted a mix of both strategies.

Mr Berglund comments: 'If shippers can delay procurement of new freight rates for as long as possible, it is advisable to wait and sit it out for the first quarter of 2020. Delaying negotiations and monitoring freight rate developments over Q1 should provide a better view on how to navigate upcoming freight rate negotiations.


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