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Shipping Review
Coronavirus blamed for drop in long-term contracted container freight rates
Date:2020-04-13 Readers:
THE container shipping segment is suffering its first monthly fall in long-term contracted ocean freight rates since October, with data from Xeneta's XSI Public Indices report showing a dip of 0.5 per cent in March rates, ending a sustained period of growth.

"Although these symptoms look mild, the future is characterised by growing uncertainty, with widespread economic disruption and looming global recession likely to impact on demand across all key trading routes," Xeneta warns.

CEO Patrik Berglund commented: "After a welcome period of growth in rates development this is a small, yet significant, step in the wrong direction for carriers.

"On the face of it the index is still performing well, up 5.8 per cent year on year and with a 2.2 per cent rise since the end of 2019, but the coronavirus pandemic is now causing disruption to trade and economic activity on an unprecedented scale. The container industry, operating on the front line of the global economy, is bracing itself to feel the full impact of that."

Mr Berglund noted that all key trading routes face challenges, with recovering Chinese factories now confronted by a near complete lockdown across Europe, where Maersk Line and Mediterranean Shipping Company (MSC) have responded by cancelling their AE1/Shogun North Europe loop, while the 2M alliance has blanked its AE20/Dragon Mediterranean service.

Over in the US, there are clear signs of recession with Goldman Sachs forecasting a 24 per cent decrease in GDP for the second quarter, and with 3.3 million jobless claims made in mid-March.

"The magnitude of this can't be overstated," Mr Berglund continues. "The economic downturn and a widespread drop-off in consumer spending are unlikely to give way to rapid recovery. This creates a hugely challenging environment for carriers, who will need to ensure adequate measures are taken to prevent a sustained drop in rates.

"And of course, the big question now is how long will the pandemic last? With the possibility of secondary outbreaks later in the year, it's not clear if demand will, or indeed can, quickly recover once a sense of 'normality' is resumed.

"This prolonged period of uncertainty and reduced demand will likely place downward pressure on both spot and contracted rates. As such, we're entering a period of flux where all stakeholders must access the latest market intelligence to get the best value for their businesses."

Despite the worrying economic indicators and disruption throughout March, the news from XSI's regional reporting is far from universally bleak. In Europe the import benchmark fell away by one per cent, but the export index climbed by 0.5 per cent. Both figures are up year on year, with consecutive rises of 5.8 per cent and 6.7 per cent.

Far East developments were similar, with imports edging up 0.4 per cent (down 11.6 per cent against last year, but up 3.4 per cent since December 2019) while the export benchmark slid back 0.8 per cent (up 6.4 per cent year on year).

News from the US was also mixed, as imports increased by 1.3 per cent (up a huge 23.1 per cent year on year) and exports fell by 2.3 per cent. However, despite this fall the benchmark remains up 2.6 per cent since March 2019 and has climbed by 1.7 per cent since December 2019.

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Back:  Container shipping hit on all fronts by virus pandemic; signs of worse to come
Next:  NWSA sees volumes drop 21pc in March, other ports suffer similar fare
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