Xeneta global community of shippers is reeling from the impact of the demise of Hanjin Shipping, the world’s seventh largest containership operator. Xeneta crowd-sources shipping rate data from more than 600 major international businesses, many of whom have now been hit by stranded inventory, rising prices and – in a shock development for a sector struggling with structural overcapacity – claims of under-capacity from the remaining liners.
Oslo-based Xeneta is a global benchmarking and market intelligence platform for containerized ocean freight. Its community of shippers provide it with up-to-date information across over 17 million contracted rates, covering more than 60,000 port-to-port pairings. This gives it, and its customers looking to negotiate the best rates, an unrivalled real-time snapshot of the market.
That snapshot isn’t pleasant viewing for shippers right now.
“The Hanjin saga has the potential to redefine the container shipping landscape,” comments Xeneta CEO Patrik Berglund. “For an industry that has struggled with collapsing rates, severe overcapacity (8.1% at the beginning of 2016) and devastated profit margins – with even Maersk down 90% year on year for Q2 – this marks an opportunity to finally regain the upper hand at the negotiating table.
“Hanjin’s failure resulted in an immediate capacity reduction of up to 8% in transpacific and Asian-European routes and this gives competitors an obvious fillip. We’ve seen 2M (MSC and Maersk) moving to launch a new transpacific service, while the feedback we’ve received from our community details rising rates, stretched capacity, claims of broken contracts – when agreed at low prices – and a need to go to the spot market, where quotes of between one and three months are not being contracted.
“In many ways the market has been turned on its head. Now it’s the liners flexing their muscles again. The question is, how long will this last?”
Berglund says that for many of the firm’s community it’s the stranded inventory that’s the number one priority, with an estimated USD 14.5 billion of goods marooned on vessels worldwide, belonging to some 8,300 different companies. Many of Xeneta’s customers have “hundreds of containers” stranded at sea.
That’s the immediate concern, but, as he explains, the long-term is also causing consternation:
“Short term rates were already rising on the main Far East Asian to North European port route, the world’s most important trade channel, since hitting lows in March. Then the market average price for a 40’ container stood at USD 552, in late August it climbed to USD 1172 and now its USD 1834. Transpacific routes have climbed from USD 839 in March to USD 1887 now.
“As the year comes to an end the tendering/bidding season starts for many European shippers. This will be a wake up call for the large-volume shippers who have maybe become accustomed to basking in long-term contracts at low rates. In a changed market the carriers won’t be as accommodating. Last term’s prices will suddenly be a distant memory.”
The container segment has been stuck on a rollercoaster for years, Xeneta argues, and this latest corkscrew will do little to ease the sense of fluctuating rates and jolts in supply and demand.
“Stability is sorely lacking,” concludes Berglund, “and Hanjin could be the tip of the iceberg, as lenders tire of propping up players that have been limping along in this difficult market for too long. For the time being the carriers will enjoy exploiting the change of fortunes and their overcapacity gives them the means to step in and fill Hanjin’s hole. But this isn’t the long-term fix the industry needs.
“In this uncertain environment prices will continue fluctuating. That means shippers, freight forwarders and carriers need the latest data, from advanced software platforms like ours, to stay on top of developments and get the right price for their cargoes.
“There’s much more to come in this dynamic segment. I’d advise everyone to stay tuned.”