Executive Briefings

Ocean Container Rate Increases on East-West Trades 'Disguise' Industry's 'Fundamental Weakness'

The recent increase in container freight rates on major east-west trades is no more than a flimsy disguise for the "fundamental weakness" of the ocean shipping industry, according to ocean freight rate benchmarking and market intelligence provider Xeneta.

Spot rates measured by the Shanghai Container Freight Index and Ningbo Containerized Freight Index rose sharply last week on the news South Korean ocean carrier Hanjin Shipping had filed for court receivership, leaving various ships stranded and some carriers refusing to tender cargo to or receive its cargo, at least temporarily.

Oslo-based Xeneta, which crowd-sources over 12 million contracted rates over 60,000 individual port pairs, said the “positive swing belies an industry still suffering from weak demand, increased void sailings and devastated profit margins.”

“The container ship sector has been in a state of flux for some time and, unfortunately for its key players, the prospect of stability remains a distant speck on the horizon,” said Xeneta CEO Patrik Berglund.

“Short-term rates have been rising on the main Far East Asian to North European port route, the world’s most important trade channel, since hitting lows in March. At that point, the market average price for a 40-foot container stood at $552, now it’s climbed to $1,172. On the face of it, this is a strong development for container ship companies, but the industry has been undermined by weak fundamentals for so long that it’s not quite that simple."

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Spot rates measured by the Shanghai Container Freight Index and Ningbo Containerized Freight Index rose sharply last week on the news South Korean ocean carrier Hanjin Shipping had filed for court receivership, leaving various ships stranded and some carriers refusing to tender cargo to or receive its cargo, at least temporarily.

Oslo-based Xeneta, which crowd-sources over 12 million contracted rates over 60,000 individual port pairs, said the “positive swing belies an industry still suffering from weak demand, increased void sailings and devastated profit margins.”

“The container ship sector has been in a state of flux for some time and, unfortunately for its key players, the prospect of stability remains a distant speck on the horizon,” said Xeneta CEO Patrik Berglund.

“Short-term rates have been rising on the main Far East Asian to North European port route, the world’s most important trade channel, since hitting lows in March. At that point, the market average price for a 40-foot container stood at $552, now it’s climbed to $1,172. On the face of it, this is a strong development for container ship companies, but the industry has been undermined by weak fundamentals for so long that it’s not quite that simple."

Read Full Article