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Xeneta: Jump in contracted freight rates for container ship sector as new contracts finalised

Analytics platform Xeneta has revealed a jump in long-term contracted rates for container ship operators during May, as 2018 rates expire and new contracts push the index upwards.

According to the XSI Public Indices Report – based on crowd-sourced data covering over 160,000 port-to-port pairings– global rates leapt by 11.5% across the month, with US rates for imports climbing by close to 20%.

The increase follows on from a dire April for contracted liner business, with the indices at that point slumping by 4.2% (after two months of increases).

It all goes to show, according to Xeneta CEO Patrik Berglund, the increasingly ‘topsy turvy’ nature of the freight rates landscape.

He stated: “May’s XSI public index sees an increase based on what was contracted in April. We’d already started seeing contracts populating the platform at higher levels than last year at that point, particularly for the trans-Pacific, and that has helped propel this increase.”

Arguably the most eye-catching change was an 18.8% month-on-month increase in the US import index, while exports climbed by a more modest 1.5%.

This figure was mirrored by a 1.7% rise in the European import benchmark, whereas exports grew by a more noteworthy 6.7%, notably on Europe to US and Brazil trades.

Interestingly the Far East import index bucked the trend, declining by a significant 14.2% (leaving it 17.2% down year-on-year). However, the regional export figure jumped by what Berglund calls a “massive” 15.9%.

One issue, looms large across the segment, Berglund noted: “The China-US trade war. The factors feeding into the industry are too manifold, too interweaved, to identify one all consuming ‘culprit’, but it’s clear that the tit-for-tat tariffs that are being levied by the world’s two largest economies are influencing the world’s number one mode of transporting goods.

“Front loading due to the tariff scare raised short-term rates making it a favourable seller market, but now rates have started dropping again. As those rates dropped, BCOs and carriers settled long-term contracted rates on the back of an artificially healthy short-term market.”

He continued: “The clear winners for the trans-Pacific contract season are the shippers who have held off concluding their negotiations, as well as carriers, who on the flip side grasped on to early contract conclusions.  Unfortunately, buyers who settled contracts early on, or mid trans-Pacific contract season, will not reap the benefits as the dust settles from the short-term market.”

Increased costs related to the tariffs may have a longer-term impact on demand, he added, meaning the positive development might be short-lived.