Ocean carrier rate structure leaves futures markets shaky

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

The “good news story” of the season appears to be generated by officials at The Port of Oakland, who report that it has taken additional steps in an ongoing effort to manage a surge of inbound container vessel calls.

The PMA, which represents employers at America’s 29 West Coast ports, has finally asked for federal mediation in its contract negotiations with the ILWU.

Seasonally-adjusted (SA) for-hire truck tonnage in November was up 3.5 percent compared to October, which was up 0.5 percent over September at 136.8 (2000=100), marking the highest SA on record.

UPS said that through this acquisition it will augment its healthcare expertise and network in Europe, specifically in the fast growing healthcare markets in Central and Eastern Europe.

Carloads were up 12.1 percent at 312,271, and intermodal at 280,337 containers and trailers saw a 4.5 percent annual gain.

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.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA