Freight rate uncertainty puts pressure on all stakeholders

For neutral groupage
operator CFR
Freight, 2016 was a
spectacular year for
airfreight while seafreight
performed at a more sedate
pace.
Managing director
Martin Keck believes that
rock-bottom seafreight
rates had a lot to do with
this modal shift.
“Our take
is that some
traditional
LCL traffic
turned into
FCL business
– and in
some cases
airfreight.”
And
with
bargain-basement freight
rates, this was a logical
development.
“Because freight rates
were so low, we believe
some importers were
holding back and
consolidating cargo in
a full container – and
even if the container
was half empty it made
financial sense.”
Airfreight provided
the back-up for urgent
consignments.
“Low freight rates
are everyone’s
enemy,” says
Keck, “and that
includes freight
forwarders,
shipping lines
and NVOCCs.”
But the tide
could be turning
as the impact
of mergers,
consolidations
and the demise
of Hanjin Shipping filter
through.
“We’ve seen Cosco joining
forces with China Shipping,
the three Japanese lines
merging, Maersk bidding
to acquire
Hamburg
Süd, to
mention a
few – and
it’s not
finished yet.
Competition
is therefore
likely to
diminish
which will
hopefully
lead to
higher
seafreight
rates and a return to
growth in LCL cargo.”
Low rates are a self-made
dilemma,” says Keck. “The
shipping lines created the
overcapacity and they are
still suffering.”
These sentiments have
been well documented in
the maritime press – and
succinctly expressed in
research released by Oslobased
Xeneta.
“With the
majority
of carriers
losing money
hand over
fist last year,
the industry
simply
wasn’t
sustainable.
And that’s
bad news for
shippers, as
well as the
shipowners,
as they need
optimal reliability in their
supply chain. Stability is
what all parties desire –
built on a foundation of fair
rates – but that still looks
elusive as we head further
into 2017.”
And that’s not the only
uncertainty that the freight
industry faces.
“Donald Trump, Brexit
and the growing move to
protectionism will clearly
impact the global economy
– and while it won’t affect
our sector directly, there is
likely to be some collateral
damage in terms of the
impact on currency.”
The weaker pound,
for example, could affect
exports to the UK.
But despite the
headwinds in 2016, two
months into the new year,
figures are looking very
promising for CFR says
Keck – which is good news
for longer-term projections.
“Our traditional sea and
airfreight services are well
bedded down and we are
now gearing up for the next
chapter – in which Africa
and IT will play a central
role.”
INSERT
Our take is that
some traditional LCL
traffic turned into
FCL business ― and in
some cases airfreight.
– Martin Keck