As the shipping environment appears to grow more conducive, negotiated contract rates for the China-North Europe corridor for mid-June 2017 have gone up by more than 64% year-on-year, but market uncertainties still prevail, according to a freight rate benchmarking data provider.
Ocean freight contract discussions for the China Main-North Europe corridor are moving along now following delays late last year and early this year as cargo owners sat cautiously back to see how the market would develop, said Xeneta in a new review.
With the market seemingly recovering after a rally in the fourth quarter of last year, carriers still remain more in the driver’s seat. “The much anticipated Chinese New year did not do too much to crash prices significantly,” said Xeneta.
It said data for long-term contracts negotiated in the past three months for mid-June 2017 show a “telling” increase of over 64% in the market average price compared to the three months leading to mid-June 2016.
“The future long-term rates data for June 2017 on this corridor is based on over 1500 contracted rates from global large-volume shippers who have signed long-term contracts with suppliers in the past 3 months,” it said.
Contract negotiations for North American companies will also begin soon and the trans-Pacific trade will be in the spotlight next, the report added.
However, although the market seems on a recovery path, Xeneta said the situation is still dicey for a number of reasons.
For one, demand is still low, though there are reports that it is increasing. “In any case, one thing that is for sure is that economic and political situations affecting demand are currently unpredictable.”
Too, overcapacity remains an issue, as none of the current capacity has been removed, just shuffled. And while the entry of some mega ships has been postponed, others are still set to enter an already crowded market.
The start of operations of the new alliances in April is another unknown variable. The impact on freight rates as they compete in similar corridors remains to be seen.
Finally the capacity crunch is making some shippers nervous and turning to airfreight, and time will tell if this trend is sustainable, said the report.