Softening spot rates could mean ‘days are numbered’ for ad-hoc carriers

Spot rates for container shipments might be coming down from the stratosphere. There are a few indications, such as Xeneta’s XSI short-term index from Asia to North Europe.

If short-term rates really are coming down, what is going to happen to many new ocean shipping entrants in the trade from Asia? These new firms offer regular shipments with no blanking, faster transits, calling at less congested ports for faster unloads, status monitoring, and good communication.

Most of these firms have a limited number of smaller ships. The conjecture here is that they cannot survive if rates drop back to reasonable levels.

I think this position underestimates the value of on-time and reliable service. Many shippers will pay to get out of the bottleneck system the alliances are running, with large ships calling at large congested ports, and frequent delays of service, including simply canceling voyages if they aren’t full enough. You can’t have a viable business if you’re only on-time 30%-40% of the time. Lots of customers will choose another way.

We have already seen large container shippers such as Amazon, IKEA, and Costco choose dedicated service with captive vessels for some of their cargo. If it works well, that could expand, leaving the major alliances with less cargo to carry.

Interestingly, the large ocean carriers have a new name for what they are doing. Canceling a voyage is not to be called ‘blanking’, but rather ‘sliding’. Whatever you call it, it’s a disruption in service supposedly guaranteed.

By Mike Wackett 11/02/2022

Softening spot rates could mean ‘days are numbered’ for ad-hoc carriers – The Loadstar

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