Ocean rates on the rise outside of ‘Hanjin effect’

Ocean freight rate benchmarking platform Xeneta said transpacific rates have been gradually rising since April, stripping out the short-term impact of Hanjin Shipping’s insolvency in late August.    Ocean freight rates have been on a gradual rise since April, stripping out the short-term impact of Hanjin Shipping’s insolvency in late August, according to the containerized ocean freight rate benchmarking platform Xeneta.
   Xeneta, which crowd sources shipping data from more than 600 major international businesses, covering more than 60,000 port-to-port pairings and over 17 million contracted rates, said Hanjin’s collapse temporarily transformed an oversupplied market to undersupplied overnight, causing significant hikes on short-term rates in the third quarter.
   “It was certainly a stand-out quarter,” Xeneta CEO Patrik Berglund said, noting that the market average price for 40-foot containers moving from Asia to North America rose by 47 percent across the quarter, from $1,240 to $1,826.
   “However, looking at today’s data, we can already see that prices are trending down somewhat, meaning the ‘Hanjin Effect’ is history. There is clearly still an issue of structural overcapacity, albeit more balanced now, and that pushes prices down – with risks for both the carriers and BCOs/shippers. Short term rates on the number two route – Far East Asia to North Europe – actually fell by 24 percent in Q3.”
   Berglund said the impact of Hanjin exiting the market should be seen in the context of rate movement since spring.
   “This is more of a stabilization, or flattening out,” he said. “Market averages for 40-foot containers hit a low of $662 in April and had risen to $1,500 by the close of September on this route. So, the fall isn’t as serious for carriers as it may seem. However, if it continues, that’s another matter. That could bode for a very challenging 2017 for carriers and, therefore, a risky time for shippers who must have predictability in their supply chains.”
   Berglund said Xeneta’s network of large volume shippers seeking long-term contracts are reporting carriers aren’t prepared to negotiate near the bottom end of the current market, where many of the older, expiring long- term contracts sit.
   “This should wave a red warning flag to any shipper tendering/bidding for new long-term rates in January, the European norm, and next May, the US standard,” he says. “It makes it clear carriers have an expectation that the market will continue to pick up.”
   American Shipper profiled Xeneta in its October issue.