Xeneta believes Panama Canal extension may be bad news for some container ship carriers

7 July 2016, Oslo: Xeneta, the leading global benchmarking and market intelligence platform for containerized ocean freight, believes that the newly inaugurated Panama Canal may not be as beneficial as it seems for container ship carriers. Although the new sets of locks and deeper, wider shipping channels will potentially double the waterway’s capacity, giving neo-panamax vessels access for the first time, the increased efficiencies may actually undermine rates – deepening the crisis for a segment already suffering the strains of severe over capacity and cut-throat competition.

Xeneta - which boasts an unrivalled database of over 12 million contracted ocean freight rates, crowd sourced from more than 600 major international businesses – has charted a spectacular fall in container rates over the last two years. As an example, the short-term market average rate for transporting a 40-foot container from Shanghai to Rotterdam has fallen by over 60% since Summer 2014 (currently standing at USD 941).

The Panama Canal extension, opened on 26 June by the 9,472 TEU Cosco Shipping Panama, was meant to be a boon for carriers, giving vessels carrying around 13,000 TEU's all-water access from Asia to the crucial US East Coast ports and inland markets. But, according to Xeneta CEO Patrik Berglund, this neo-panamax short-cut could come at a crippling cost.

“On the face of it improved transit times and two way traffic deliver huge benefits for container carriers,” he notes, “facilitating more cargo to the US East Coast and Caribbean ports faster and cheaper. However, there could be real trouble brewing on the horizon.

“Firstly, the neo-panamax vessels have to attract trade to this fresh route, and this could initially force them to keep rates artificially low - the last thing the industry needs. Then we have the fact that more ships will be able to compete on the East Coast, potentially pushing rates even lower.

“This will most probably be exacerbated by the newly arriving fleets of 18-20,000 TEU megaships – MSC has four in the pipeline now – causing a cascading of existing tonnage onto attractive routes, like the East Coast. It all spells, what could be, an impending financial disaster for a segment currently defined by consolidation, new alliance-building, and on-going uncertainty.”

Berglund is backed up in his analysis by Rosemont College Professor Andrew Lubin, a specialist in container freight and logistics. He notes that, at present, 68% of container movement from Asia into the US East Coast comes via the West Coast, but believes that about 10-14% of that will be diverted to the Gulf and East Coast ports within the year.

“Faster transit times and the fact that carriers switching tonnage to the East Coast will now be able to avoid West Coast labor unions will boost vessel numbers and therefore competition,” he says. “Increased competition has an obvious impact in the market - lower rates.”

Berglund concludes that this is only the latest development for an industry that is currently in a constant state of flux.

“Rates across the more than 60,000 port-to-port pairings we cover are changing all the time,” he states. “For shippers, freight forwarders and carriers to keep pace with developments, and get the right price for their cargoes, they have to use software such as ours to exploit the true potential of big data.

“Information is knowledge and, especially in a market like today’s, has to be the cornerstone of every key business decision.”

Note: Xeneta will be holding its Q2 shipping rates review live webinar on 14 July. To register please go to

http://www.xeneta.com/q2-2016-ocean-freight-shipping-prices-at-a-glance-webinar

About Xeneta

Xeneta is the leading ocean freight price comparison and shipping market watch index transforming the shipping and logistics industry. Xeneta’s easy-to-use yet powerful reporting and analytics platform provides shippers and freight forwarders the software data they need to compare their shipping prices against the world's largest database of contracted rates – reporting live on market average and low/high movements. Xeneta’s shipping indexes comprises of over 12 million contracted rates and covers over 60,000 global trade routes enabling informed decisions with actionable intelligence optimizing companies’ logistics procurement. Xeneta is a privately held company and is headquartered in Oslo, Norway. To learn more, please visit www.xeneta.com.

www.xeneta.com

For further information please contact:
Katherine Barrios  
CMO
Xeneta AS
M: katherine.barrios@xeneta.com

P: +47 95 14 64 14

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Blue-C is a team of English language communications, marketing and PR experts. We specialise in the maritime, offshore, energy and wider business-to business arenas.We are a global provider of professional corporate writing services.

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