Ocean freight Rates to rise in 2017

Ken Klaver

Ken Klaver

January 31, 2017 - 16:31

Freight rates on many ocean container trade routes could rise between 20-40% in 2017.

This according to a report by transport procurement analyst Drewry. As a result, many Asia-Europe shippers have waited until after Chinese New Year before signing long-term contracts. This is a returning strategy that many shippers use. 2017 was no different. Many companies await the Chiness New Year, hoping that spot freight rates will decline.  

“This happens every year,” Simon Heaney, senior manager for Supply Chain Research said during a webinar by Drewry earlier this month. “So it makes sense not to make negotiations while spot rates are at their peak. Post-CNY, rates will go down.”

 Freight rates 2017: Don't wait too long

Heaney warns shippers not to wait too long, because that might not lower logistics costs after all. “What we are hearing is that there are backlogs after a strong demand period. So it makes sense to wait. But keep in mind, spot rates on Asia-Europe will rise, so we wouldn’t advise on waiting too long. But it certainly makes sense to hold on for now.”

Ocean Freight: days of large annual growth are gone

Neil Dekker, director at Drewry Analysts,  acclaimed that the days of 4-7% rate growth in the global container trade were 'long gone'. Still, there is reason for positivity he said. A trade expansion of 2.1% is expected - up from 1.3% in 2015 and 1.3% in 2016. Regarding the 2016 ocean freight rates, Dekker saw a clear-cut playfield, with two divided sides. The 1st half of 2016 was dominated by shippers as rates plummeted in Q1 on Asia-Europe and the Transpacific on weak volumes and oversupply. “The 2nd part of the year, the tables turned and demand growth returned to positive territory as shrewd capacity management by carriers saw utilization levels increase.”