Executive Briefings

Freight Rates for Container Cargo Still Falling, But at Slower Pace

Container freight rates for cargoes moving under contracts on major East-West routes have continued to erode, but at a slower pace than previously, according to the results of Drewry's Benchmarking Club.

Freight Rates for Container Cargo Still Falling, But at Slower Pace

The Drewry Benchmarking Club contract rate index, based on trans-Pacific and Asia-Europe contract freight rate data provided confidentially by Asian, American and European retailers and manufacturers, decreased by just 1 percent between July and November. Between March and July, the Benchmarking Club had seen a 4-percent average reduction in contract rates.

“It is too early to say whether the smaller 1-percent fall in costs since July signals the potential end of the downwards trend of the last few years, or reflects the fact that only a small proportion of contracts were renegotiated recently,” said Philip Damas, director of Drewry Supply Chain Advisors.

Under its statute, the Benchmarking Club of importers and exporters can provide current anonymised freight rate market data to its members, but it cannot discuss contract negotiations or rate expectations.

The Benchmarking Club, an initiative of the logistics consultancy arm of maritime advisory group Drewry, comprises shippers with annual freight volumes ranging from 5,000 TEU to more than 300,000 TEU. Through the Club, members can confidentially compare their anonymous contract rates with those of other shippers. They are also able to make comparisons against predefined categories of small, medium and large shippers who are moving cargo on the same routes.

“Many large shippers and carriers are currently tendering and negotiating their 2015 Asia-Europe and trans-Atlantic contracts. We will know next February, when the first-quarter contract rate index is released, whether container freight rates have stopped falling,” added Damas.

Due to non-disclosure agreements with all shipper members of the Benchmarking Club, Drewry cannot share detailed cost benchmarking intelligence with companies which are not members of the Club.

Unlike other indices, the Drewry Benchmarking Club contract rate index measures freight rates under annual contracts, not spot freight rates.

Source: Drewry

The Drewry Benchmarking Club contract rate index, based on trans-Pacific and Asia-Europe contract freight rate data provided confidentially by Asian, American and European retailers and manufacturers, decreased by just 1 percent between July and November. Between March and July, the Benchmarking Club had seen a 4-percent average reduction in contract rates.

“It is too early to say whether the smaller 1-percent fall in costs since July signals the potential end of the downwards trend of the last few years, or reflects the fact that only a small proportion of contracts were renegotiated recently,” said Philip Damas, director of Drewry Supply Chain Advisors.

Under its statute, the Benchmarking Club of importers and exporters can provide current anonymised freight rate market data to its members, but it cannot discuss contract negotiations or rate expectations.

The Benchmarking Club, an initiative of the logistics consultancy arm of maritime advisory group Drewry, comprises shippers with annual freight volumes ranging from 5,000 TEU to more than 300,000 TEU. Through the Club, members can confidentially compare their anonymous contract rates with those of other shippers. They are also able to make comparisons against predefined categories of small, medium and large shippers who are moving cargo on the same routes.

“Many large shippers and carriers are currently tendering and negotiating their 2015 Asia-Europe and trans-Atlantic contracts. We will know next February, when the first-quarter contract rate index is released, whether container freight rates have stopped falling,” added Damas.

Due to non-disclosure agreements with all shipper members of the Benchmarking Club, Drewry cannot share detailed cost benchmarking intelligence with companies which are not members of the Club.

Unlike other indices, the Drewry Benchmarking Club contract rate index measures freight rates under annual contracts, not spot freight rates.

Source: Drewry

Freight Rates for Container Cargo Still Falling, But at Slower Pace