Rates through the roof
The record current spot market rates just represent the beginning for the London-based analyst Drewry. The firm’s experts see the concentration of shipping companies, alliances and capacity management as heralding a new era.
The current development can’t be called the boom in maritime freight rates that has been hoped for for many years now, as the maritime consultancy firm Drewry has emphasised. According to the experts in London the end of a 15-year trend in deepsea shipping is rather looming on the horizon, which will lead to a new era.
Spot rates point the way
Freight rates for spot containers destined for the Far East have experienced a dizzying rise since the beginning of the pandemic. Historic highs have been exceeded by 40%. Drewry measures the development against its own benchmark for spot freight rates between Hong Kong and Los Angeles. This spot rate index recently stood at a 15-year high of USD 4,081 / feu. The previous record from 2012 had stood at USD 2880 / feu – and was pulverised weeks ago.
Beyond the traditional dynamic
The spot market is only one indicator of the new times to be expected in this market, Drewry said in a comment. “We believe that what we’re currently experiencing goes beyond the traditional supply and demand dynamic in this market.” A number of factors are causing a fundamental reorientation.
The wave of mergers and acquisitions among shipping lines over the past decade is the first; and the organisation of firms into alliances the second. Now the tactical use of tonnage is fundamentally changing the market. In the eyes of the analysts “the higher concentration in the shipping industry, combined with strictly-managed capacity discipline among carriers,” is putting shipping on a new footing – and one that will last. Shippers and forwarders should therefore prepare themselves for permanently higher prices in 2021.
However, the oligopoly of the shipping companies is not untouchable. Cartel authorities could intervene. “Regulatory authorities in China and the US are already monitoring the market very closely,” Drewry closed.
