Ocean freight rates may be in for another spin: Xeneta
Capacity parked on the ocean earlier is now being applied again, which is putting pressure on the market
Some shippers may have an element of payback in mind since recession has started to bite in some markets, and demand for goods is dropping, says Xeneta in its latest ocean freight update.
"Shippers were willing, through gritted teeth, to weather the high leap in prices to meet point-of-sale contracts and to retain customers, but moves were in place to mitigate that exposure. Manufacturing of some goods could be shifted to more local production, some goods were just not economical to shift at all, and some became cheaper to move by air freight."
The capacity wheel has turned but will things return to pre-Covid levels? "The worst does seem to be over, so time to start the discussions again. We are not seeing the 40-50 percent premium anymore. However, we still see a differential of about 20 percent in some cases; so regarding the freight forwarder customers, we are not back to normal yet. Maybe now is a good time to start the discussion with the freight forwarder to try to go back to the kind of regular levels of the past."
Capacity parked on the ocean earlier is now being applied again, which is putting pressure on the market, not only in Asia-U.S. but also Asia to Europe, the update said. "Ships can be turned around faster again, so capacity is being released."
Michael Braun, Vice President, Customer Solutions Team, Xeneta says: "Some shippers may still be in a position to pay higher rates, there will be differing relationships but there is a reason why certain carriers are now being extremely aggressive on the spot market. They would not do that if they had ships full of their own stuff.
"I think the worst they have at the moment, and this refers a little bit to the discussion with the FMC, is they might have a half-full ship with boxes from another carrier running on a 5,000 dollar long-term rate, and they don't get anything themselves. I think this is the biggest struggle they are having now.
"So, they don't get their 10,000 dollar rate shipped anymore but their competitors are using their ships for the 5,000 dollar rate. That's the reason why they now want to burn the market with a 1,500 or 2,000 dollar rate."
It seems the wagon may be gearing up for another spin around the rollercoaster, the report said.