View of the price fluctuations for over a year :
View of the price fluctuations for the last 3 months:
Measurements: USD per container
In the yearly perspective graph of the global container index, we can see a drop between 10 December and 24 December 2018. We assume that this drop is connected to Christmas Holiday and the tendency of businesses to order before this time period to have high level of inventory. Thus, there is not a lot of delivery at that time right before the holiday, so the demand decreases with the freight rate accordingly.
One of the major influencers of freight price movement is China as it is one of the largest exporter of goods and importer of commodity. The movement of fluctuation in freight price is affected by the Chinese New Year (“CNY”) which is on the 5th of February with the overall price movement of freight. Chinese people have three weeks of holidays before “CNY” to travel across the country which means most if not all trade activities are stopped during this time.
When looking on the freight price fluctuation for the different routes, the only freight rate that decreases over the time is the route between China/East Asia and USA (Pacific) compared to the others such as Atlantic and Suez route.Even though it is the only route decreasing, it still has an impact on the overall freight index (decrease of 2%) as China is one of the most influential players in regards to international trade.
A background factor for the decrease in the price of freight may be the trade war between the US and China, as the barriers to trade increase between these two larger players in the world’s economy. The trade between those two is therefore declining which then results in the decrease of demand for transporting goods. This creates a situation where the supply is higher than demand and which the therefore drives prices down.
Freight rates set to rise in the future
New regulations on sulphur oxide emissions implemented by the International Maritime Organization 2020 (“IMO 2020”), would likely increase freight rates. The reduction of sulphur oxide emission is set to decrease from 3.5% m/m (sour) to 0.5% (sweet) m/m. At this time, fuel costs already represent more than 50% of total operating costs for the carrier. If the new regulations would take place, the fuel costs will potentially rise to around 75% of total costs. This increase in price comes from the fact that now they will need to buy low sulphur fuel costing more than the fuel with high sulphur percentage. This is why the IMO took this decision in order to reduce pollution derived from shipping.
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