The ocean freight market appears more firmly set for a recovery, and the uptrend in freight rates is expected to continue for the rest of the year, predicts Xeneta.
The global sea freight market intelligence service said the shipping and logistics market is optimistic about its prospects in the second half of 2017, convinced that a freight recovery is underway.
Xeneta noted that after posting combined net losses in 2016 of US$5 billion, the top 20 operators by capacity have since merged or formed alliances and most are expected to swing to profit this year.
It also cited industry analysts’ forecasts that Maersk will increase its net operating profit after tax by 32% this year to $1.6 billion based on 10% higher freight rate. Meanwhile, Hapag-Lloyd’s adjusted earnings before interest and tax are seen to more than triple to $442 million due to higher rates and contribution from its merger of United Arab Shipping Company.
Xeneta said its optimistic outlook is anchored on its market analysis showing rates are higher this year as compared to 2016.
In addition, for those container carriers focused on the Asia-Europe route, it observed that the increases in long-term contract freight rates, which in May were $1,396 for a 40-foot box from a Chinese main port to Northern Europe, were 120% higher than was charged in May 2016.
Meanwhile, Xeneta said that the disruptive effect of the consolidation of carriers is already being felt by ports and shippers.
Effective since April of this year, THE Alliance, the OCEAN Alliance, and the 2M Alliance structure has already made an impact. Xeneta pointed to market research showing that these alliances, which account for over 90% of container ship traffic worldwide, have disrupted Europe-to-Asia container traffic at an unprecedented scale.
U.S. ports have also experienced delays. For example, Seattle’s container Terminal 18 has had to deal with crowded truck turn times lasting from one hour to one day as the port absorbs more calls thanks to the new shipping alliances. The ports of Los Angeles and Long Beach have also struggled with rail timing at dockyards after increased calls from the 2M alliance.
“While alliances overall benefit the customer, the formation of a new alliance is disruptive for customers in the short term,” Maersk said in a statement. “When a container shipping line moves from one alliance to another both alliances need to redo their networks. There will be shorter and longer periods with frequent changes to services and offered capacity and fluctuating reliability.”
The issue of port congestion may be a positive development for the air freight industry, observed Xeneta. “For the air freight market, this could be an opportunity to keep watch on. We may see a shift as shippers look for ways to reduce any disruptions. Forwarders will certainly benefit in all of this as they assist shippers with value-add solutions such as alternative delivery modes and routes.”
Photo: U.S. Marine Corps
