Ocean carriers scrambling for business

Ocean carriers scrambling for business
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Oslo-based freight shipping analyst Xeneta AS says ocean-going container ship owners “are no longer pricing cargo according to type, [and] simply filling their vessels is now the number one priority.”

Xeneta, which describes itself as a benchmarking and market intelligence platform for containerized ocean freight, says oversupply, better supply chain management and low fuel costs have made the market “so competitive over the last 18 months that ‘what’s in the box’ no longer plays a part in negotiations.” That is likely good news for scrap shippers, who often receive low priority.

Data gathered by the firm indicates the market average price for transporting a 40-foot container from Shanghai to Rotterdam, on a short-term contract, has slumped dramatically since mid-2014. As of April 19, 2016, the market average price stood at $595 (a 78% drop compared to July 1, 2014) and at $321 for the market low (an 82% drop over the same period).

“In today’s market there’s too many boxes chasing too few cargoes,” states Xeneta CEO Patrik Berglund. “Traditionally, cargo was rated by weight or measure, with the ratings based on the cargo type. Calling a carrier or NVOCC (non-vessel operating common carrier) rate desk for ocean freights was a painful experience, with negotiations based on cargo descriptions, packing, and cube – all designed to bring maximum revenue to the carrier,” he adds.

“But now, as long as the box isn’t overweight – although even that isn’t always an issue these days – or filled with hazardous material, that’s all been pushed to the side. The carriers just want a full box, period. It’s also important to note how contracts can make a difference here. In the current market short-term contracts, or those hunting good spot rates, are getting better deals than those with long-term contracts. This wasn’t the case 18 months ago.”

Berglund says the “new market reality” is a matter of oversupply in a declining market. “Over the last 18 months, slowdowns in the Chinese and EU economies have cut Chinese imports by 19% and exports by 13%,” Berglund notes. “When that’s married to the fact that 208 new ships were introduced to the market in 2015, boasting a capacity of 1.67 million TEUs (twenty-foot equivalent units), carriers have a major problem. Namely, a stunning 8.1% oversupply of TEUs.” Adds Berglund, “This is a very serious issue for them – one that demands action.”

Among the actions being sought by carriers are mergers. “The industry is in a state of flux,” he says. “Cosco and CSCL [two China-based lines] are looking to get their recent merger approved by EU and U.S. regulators and, together with Evergreen, OOCL and CMA CGM, form a new east-west mega-alliance. Such a powerful grouping would challenge the market dominance of the Maersk and MSC (Mediterranean Shipping Company) 2M vessel-sharing agreement, and possibly drive the price war to new highs, or rather lows,” says Berglund.

“In this environment there are rumors of rock bottom prices, with mentions of boxes booked for Qingdao from Rotterdam for as low as $100, or even lower. So, at present, ‘What’s in the box?’ isn’t the question, it’s, ‘Can we have your business please?’”

Xeneta, a privately held company, says it collects data to create shipping indexes drawn from more than 11 million contracted rates covering more than 60,000 global trade routes.
 

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Source: Recycling Today
Ocean carriers scrambling for business
<![CDATA[Oslo-based freight shipping analyst Xeneta AS says ocean-going container ship owners “are no longer pricing cargo according to type, [and] simply filling their vessels is now the number one priority.” Xeneta, which describes itself as a benchmarking and market intelligence platform for containerized ocean freight, says oversupply, better supply chain management and low fuel costs have made the market “so competitive over the last 18 months that ‘what’s in the box’ no longer plays a part in negotiations.” That is likely good news for scrap shippers, who often receive low priority. Data gathered by the firm indicates the market average price for transporting a 40-foot container from Shanghai to Rotterdam, on a short-term contract, has slumped dramatically since mid-2014. As of April 19, 2016, the market average price stood at $595 (a 78% drop compared to July 1, 2014) and at $321 for the market low (an 82% drop over the same period). “In today’s market there’s too many boxes chasing too few cargoes,” states Xeneta CEO Patrik Berglund. “Traditionally, cargo was rated by weight or measure, with the ratings based on the cargo type. Calling a carrier or NVOCC (non-vessel operating common carrier) rate desk for ocean freights was…