Moderate fall in Asia-Europe prices drove this decline, Drewry notes, while some secondary and north-south routes face double-digit increases when 2019 contracts are signed in the next few weeks.
Ocean freight rates for cargo moving under contracts on major East-West routes decreased by 7% in the fourth quarter, compared with the previous quarter, according to the results of Drewry’s Benchmarking Club Contract Index.
The quarter-on-quarter cost reduction, based on contract freight rate data provided confidentially by Asian, American and European retailers and manufacturers to the Benchmarking Club, “shows that shippers who negotiate well with carriers can continue to reduce their freight spend on most East-West routes, despite the increases in bunker prices during the past year”, Drewry noted. It said a moderate fall in the Asia-Europe rates drove this decline.
“The latest reduction in average East-West contract rates is the largest quarterly fall since the end of 2016,” said Philip Damas, director of Drewry Supply Chain Advisors, the logistics consultancy arm of Drewry.
More detailed analysis of contract rates available to retailers and manufacturers within the group shows very different rate trends depending on the trade route concerned. The eastbound transpacific ocean transport market has seen spot rates nearly double in the past year and a portion of this upwards rate pressure is being transferred to the contract market, Drewry noted.
Based on recent bids of exporters and importers for 2019 contracts, there is some evidence that the market will witness some double-digit increases in contract rates on a number of secondary and north-south routes when 2019 contracts are signed in the next few weeks.
Besides running outsourced ocean tenders for exporters and importers, Drewry analyses average, minimum and maximum contracts rates as part of the tender process and recently launched a Forwarder Benchmarking Club providing monthly “buy-rate” comparisons to international forwarders.
Looking at recent spot rates movements, the composite index of the World Container Index, assessed by Drewry, was down 1.2% on the week to last Thursday to $1,622 per 40ft container, but remains 43.1% up as compared with same period of 2017.
The rate drop last week was broadly due to changes on the transpacific trade: rates on Shanghai-New York fell by $108 from $3,449 to reach $3,341 per feu. Freight rates from Shanghai to Los Angeles dropped by $109 over the last week to stand at $2,077 for a 40ft container.
Meanwhile, rates on Shanghai-Rotterdam went up by $25 to reach $1,604 per feu. Similarly, rates on Shanghai-Genoa increased to $1,670 – a change of $62 – for a 40ft box. Drewry expects rates to soften next week.
The average composite index for the year-to-date is US $1,516/40ft container, which is $2 higher than the five-year average of $1,514/40ft container.
Source: Llody’s
