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Container shipping could be entering a 'seller's market': Xeneta

THE contract freight rate benchmarking company, Xeneta, has warned that stability will be hard to come by, and if just one or two carriers begin to drop rates and chase market share again, prices will likely fall across the board.

Container shipping could be entering a 'seller's market': Xeneta

THE contract freight rate benchmarking company, Xeneta, has warned that stability will be hard to come by, and if just one or two carriers begin to drop rates and chase market share again, prices will likely fall across the board.

Container shipping could be entering a 'seller's market': Xeneta
17 January 2017 - 20:00

Container shipping freight rates have risen significantly from the historic lows of early 2016, but "structural problems continue to undermine stability, while macro-economic and political factors are casting long shadows" on the liner industry, according to the Oslo-based contract rate information company.

"At the moment, it looks like a seller's market and if the carriers hold firm then shippers will eventually have to accept higher rates," said Patrik Berglund, chief executive offer of Xeneta. "However, the fact of the matter is there remains a structural overcapacity of containers-to-cargo. That puts carriers in a weak position and creates huge competition for business. So, it only takes one or two carriers to drop rates and chase market share and, lo and behold, prices fall again. The volatility will return."

According to Xeneta, the market average price for FEU moving from the Far East to North American climbed from a low of US$1,164 in April to $1,716 by the close of 2016. Rates from the Far East to North Europe, meanwhile, jumped from $791 per FEU to $1,878 per FEU by the end of the year, reports American Shipper.

"Prices rose from Q3 into Q4 before flattening out a little," said Mr Berglund, "but the carriers' position improved significantly from the dire situation they found themselves in early 2016. That said, it had to.

"With the majority of carriers losing money hand over fist last year, the industry simply wasn't sustainable. And that's bad news for shippers, as well as the shipowners, as they need optimal reliability in their supply chain. Stability is what all parties desire - built on a foundation of fair rates - but that still looks elusive as we head into 2017," he added.

Drewry Supply Chain Advisors, which like Xeneta provides information for shippers to benchmark freight rates, says rates for beneficial cargo owners are likely to rise by more than 10 per cent for 2017 contracts on most routes.

Mr Berglund said for carriers, "profit is still the Holy Grail and all parties need to chase the pennies" in order to survive.

"Whoever achieves the lowest cost base per TEU, while at the same time optimising their agreements on every single transaction, will emerge as the victors in this ultra-competitive landscape," he added. "A few dollars here and there on every container can add up to millions in profit for the biggest players."

 

 

 


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