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            july 20, 2019

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Sudden decline in container freight rates in April


Following two months of steady increases in long-term contracted rates for containership operators, the latest XSI Public Indices report from Oslo-based Xeneta shows a reversal of fortunes, with rates falling by 4.2 per cent.
The indices stand at 104.45 points at the end of April, the lowest level since June last year.
The rate falls were across the board with European imports fell by 4.8 per cent, while exports declined by 1.9 per cent; for Asia the import benchmark dropped by 2.1 per cent while exports slumped 3.6 per cent; and for the US the export benchmark fell by 2 per cent, while the import index dropped by 3.4 per cent.
Xeneta, an ocean freight rate benchmarking and market analytics platform, produces the monthly XSI based on crowd-sourced rates data from the world's top shippers and freight forwarders. The data covers 160,000 port-to-port pairings, with 110 million data points, enabling the report to deliver insights into the latest global freight rate developments.
"This is a real turn of events. The past two months have seen the industry halt a long-term rates decline and achieve some much needed respite, with rates rises of 2.5 per cent in February and a more modest 0.5 per cent in March. In that context a 4.2 per cent fall comes as a slight shock to the system and will have many in the industry reassessing the short- to medium-term forecasts for their businesses," commented Xeneta CEO Patrik Berglund.
"The reasons for the decline are complex, but certainly overcapacity on the European trades (with Ocean Alliance increasing activity and new slots for a standalone HMM service) and continued fall out from the US-China trade war (where shippers initially front loaded cargoes to avoid additional cost) have added to longer term structural issues and political/economic uncertainty.
"In short, suppliers have benefited from a market in flux due to trade wars, IMO, socio-economical factors, like Brexit, and now the situation is turning. As always, uncertain waters may lie ahead for the contract market."
Looking ahead it's difficult to identify obvious breaks in the clouds, Mr Berglund said. "Geopolitics remain stubbornly unpredictable, with on-going uncertainty over US-China relations, while no one - not even the people at the very top - appear to have a clear view of what is happening regarding Brexit and its consequences.
"The only advice I can really offer stakeholders on both the supply and demand side is to stay tuned," Mr Berglund concluded.

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