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Continued global uncertainty hits rates, but worst fears yet to be come: Xeneta

DESPITE the widespread ramifications of coronavirus, ocean freight rates held comparatively steady for the month of May, with the latest XSI Public Indices report from Xeneta registering a 1

31 May 2020 - 19:00

DESPITE the widespread ramifications of coronavirus, ocean freight rates held comparatively steady for the month of May, with the latest XSI Public Indices report from Xeneta registering a 1.2 per cent decline, following a 0.7per cent increase in April, leaving the index up 1.7 per cent for 2020 so far.

However, Oslo-based Xeneta's XSI warned that the future remains defined by uncertainty.



The unexpected rise in April, after a 0.5 per cent fall in March, was attributed to the proactive strategies of container ship operators, who were withdrawing market capacity and adjusting sailings in an attempt to balance supply and demand. That approach continues to mitigate damage, Xeneta CEO Patrik Berglund explained, giving some room for optimism.



'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 commented. '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 up well, some would say surprisingly so, while spot rates on key routes have also stood strong. With some national governments stepping in to support the industry - such as those in South Korea and Taiwan, who have both announced emergency funding of US$1 billion for shipping - a 'blood bath' has largely been avoided. Nevertheless, it's early days and many owners have posted worse than expected Q1 results and, it has to be said, will be dreading going public with Q2 figures.'



Mr Berglund added: 'The future, unfortunately, 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.'



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, Mr Berglund concluded.



'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.'


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