OSLO: May 18, 2016. Xeneta, the Oslo-based benchmarking and market intelligence platform for containerized ocean freight, says the industry should adopt the idea of container transport as a commodity in order to benefit both shippers and carriers.
According to the company, which tracks data across 60,000 global trade routes, short-term market average rates for the Shanghai to Rotterdam trade are typical of the current industry situation: The market average price for transporting a 40-foot container has fallen 51 percent since July 01, 2014 and is currently US$1,294. Some Qingdao – Rotterdam boxes have been obtained for as little as US$100 during the last year, it adds.
Xeneta CEO Patrik Berglund commented: “These rates are obviously positive for hard-nosed negotiators wanting to ship freight, but not for the industry, and not for anyone in the long-term,” he said. “Only a handful of carriers managed to make a profit last year and some of the biggest players, like HMM and Hanjin, are close to bankruptcy, while UASC lost a reported US$500 million in 2015.
Noting rates would “skyrocket” if the industry “loses a few significant players,” he said subsequent market consolidation would be bad for both shippers and consumers. “So, regaining a sense of stability wouldn’t just be a good thing for the containership vessel operators, but for all stakeholders, right through the entire chain,” he declared.
“At the moment shippers and carriers are at loggerheads, fighting to get the best prices in an unstable market. However, by trading the transport as a commodity, at a transparent price, both parties achieve security and get the option of buying or selling forward when they feel the price is favourable to their interests.
Berglund says that big shippers, such as Walmart or Carrefour, could forward buy the appropriate number of TEUs for their needs and lock in product pricing and profit. Meanwhile, carriers, such as Maersk, could sell forward capacity on newbuilds at the point of ordering to ensure their future profitability, rather than risking making huge investments in uncertain markets.
The Xeneta CEO said he appreciated his suggestion might be radical but pointed out: “Carriers and airlines already hedge fuel; so what’s the difference?”