Container shipping’s “rate uncertainty” has impact on futures market

The analysis comes as carriers and shippers prepare for new contract negotiations.
By Patrick Burnson, Executive Editor
February 16, 2012 - SCMR Editorial

The uncertainty over the level of container freight rates in the next few months has severely disrupted trading on the freight futures market, said analysts at the Paris-based consultancy, Alphaliner.

Volumes traded at the Shanghai Shipping Freight Exchange (SSEFC), the most active market for container freight futures, crashed to their lowest levels since the trading of container freight futures started at the Chinese exchange on 28 June 2011.

The analysis comes as carriers and shippers prepare for new contract negotiations. A general rate increase (GRI) is anticipated by both parties.

Average daily volumes traded from 2 to 8 February fell to only 15,000 twenty-foot equivalent unit (TEU) compared to the 169,000 teu average recorded for January. Forward freight rates hit their 5 percent daily cap on four consecutive trading days during that period as the market struggled to find an equilibrium following the surprise announcements by shipping lines of rate increases ranging from $400-900/teu on the Far East-Europe
trade and $800/forty-foot equivalent unit (feu) on the Transpacific trade. On 3 February, only 74 teu was traded on all Shanghai to Europe future freight contracts as market players refrained from selling forward rates due to the market uncertainty.

“Trading volumes will remain highly volatile in the next few weeks, as forward rates are expected to see wild swings as the market continues to digest the carriers’ GRI announcements,” said Alphaliner’s commercial director, Stephen Fletcher,

Forward rates to North Europe have seen a steep increase, with April contracts currently trading at $1,078/teu, rising by 54 percent from a low of $700/teu in January.

“Despite this, the carriers’ bid to raise rates is still far from assured,” said Fletcher.



About the Author

image
Patrick Burnson
Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Shippers and other ocean cargo carrier stakeholders should be cheering the announcement made today by The U.S. Coast Guard, as it formally notified the International Maritime Organization through a Declaration of Equivalency that the United States position on SOLAS is that there are multiple methods to submit the combined cargo and container weight (Verified Gross Mass or VGM).

The proposed $4.8 billion acquisition of TNT Express N.V. by FedEx took a major step closer to becoming official today, with the company and TNT announcing today that they have received unconditional approval of the offer from the Ministry of Commerce People’s Republic of China (MOCFCOM).

March shipments at 798,180 trailed February by 12 percent and were down 19 percent annually. For the entire first quarter, shipments were relatively flat annually, rising 0.27 percent to 2,587,988.

OCEMA says it has placed a priority on working with other stakeholders to find operational solutions that will help U.S. exporters, carriers, and marine terminals prepare for the implementation of the SOLAS Verified Gross Mass (VGM) rule.

The first quarter is typically the slowest period of freight demand for LTL carriers. With a few notable exceptions, that was reflected in first quarter earnings reports of the major publicly held LTL carriers.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.