A dearer outlook?

Accelerated spot rates are hitting the global shipping industry.

Global shipping is experiencing accelerating spot rates. Shipping charges from Shanghai into Northern Europe are up 64% year-to-date, year-on-year, while rates for containers bound for the US have increased by 45-50% (same period). This may be unsettling news for international meat traders: you will recognise that rises in shipping costs are customary during peak season, and know that reefers tend to follow the trends of dry containers.

While spot rates are considered an unreliable indicator for the shipping outlook, other statistics are encouraging for the sea-bound container trade. Global demand increased by 5% in the first half of 2017, with a stable global fleet growth of 1.8%, while inbound loaded containers to the US east coast went up by 10.6%. As a consequence, the global demand-supply balance has improved considerably, and could bring carriers back into profit for the first time since 2010, perhaps heralding more stable rates for importers and exporters.

The China Containerised Freight Index, a reliable indicator, rose 20.7% compared with same period 2016, yet conversely, capacity attrition to counter-balance the advent of mega ships is taking place on a large scale. As of 7 August, 182 ships (474,000 TEU) were idled (source: Alphaliner), although the global scales have yet to face the remaining four months of 2017 which will witness more ultra large capacity vessels coming online (31 vessels of over 10,000 teu, of which 11 are more than 20,000 teu). Baltic and International Maritime Council (BIMCO) reports that less than 400,000 tonnes of new orders for mega ships have been contracted since December 2015, indicating that the capacity glut of 2016 is hopefully on the wane.

These statistics may relate to dry containers, but where dry containers go, refrigerated containers tends to follow. With spot rates now on the rise, the assurance of finding the most competitive rate is a prerequisite for successful shipping trade. Freight forwarders are naturally in a prime position to ensure that meat traders in need of reefer container transport do not fall victim to sudden escalations of shipping costs.

About the author:

Rob Shelley is a partner at Maritime Cargo Services

 

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