Spot and contract container freight rates have been falling this year. Shippers are advised to use this low base for fixing contracts before bunker surcharges rise next year.
Pressure on spot rates and a general slowdown in demand is providing shippers with an ideal opportunity to fix contract rates ahead of the introduction of the International Maritime Organization’s sulphur cap in 2020.
“There is solid evidence that now is a good time to start an ocean transport tender for standard dry containers and ask container shipping providers to quote competitively,” analysts at Drewry said.
Spot market rates on most lanes, with the exceptions of the transatlantic and several north-south routes, had decreased for most of 2019, with the biggest falls witnessed on the east-west trade lanes, which had fallen by 12% in the first nine months of the year.
Moreover, the heat had come out of the transpacific market following the frontloading rush to beat US tariffs on Chinese imports.
“Traffic volumes have decreased or increased more slowly than last year in all regions,” Drewry said. “So, the spot market is now weak.”
The longer-term contract market had remained strong for longer, holding out until around May before following the same downward trend.
In this environment, there was opportunity for carriers to lock in contract rates for the year ahead.
“Our recent experience of running ocean bids showed that some carriers are currently pricing very aggressively in the market and seem keen to secure volumes rather than profits,” Drewry said.
But it warned that while shippers would be able to fix their base rates, they should not expect to reduce or even freeze their current bunker charges.
“The opportunity for beneficial cargo owners now is to identify and benchmark clearly and separately the base rate costs and the bunker costs of rates in any new bids, to develop a strategy and target to reduce the base rates part of their spend, and to develop practices to monitor and control expected increases in bunker charges.”
Source: Lloyd’s
