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2018 Rate Expectations

As we conclude 2017, one of the main questions among shippers is whether the strong upward trend in ocean freight rates in 2017 will continue in 2018.

There were several factors that played role in the increase of ocean freight rates in 2017.

One was the temporary surge caused by the Hanjin bankruptcy in September. The aftershock, and fear, among shippers pushed the shipping industry to accept higher prices. The industry then moved away from discounted rates, engaged in a price war, and dealt with aggressive tactics employed by steamship lines who were looking to obtain bigger market shares. This trend was commonly accepted among shippers to ensure continuity of service.

2017 also witnessed higher trade growth, and a volume surge, coupled with increasing fuel prices, kept supporting higher rates.

London-based Drewry Supply Chain Advisors claims the same factors will keep on pushing rates higher, while stabilizing the market in 2018. Despite increasing number of deliveries of large container ships scheduled for 2018, Drewry officials do not expect a new price war scenario in 2018, as ocean freight industry faces growth in demand, and higher carrier concentration (with new alliances) influencing the market.

Freight rates kept on increasing steadily, with an average of 10% for the first 3 quarters of 2017, compared to 2016. Many considered it a reaction, and reversal, to 2016’s deflationary trend in ocean freight. The shipping industry also experienced an 30% average increase in fixed annual contract rates for high volume Transpacific, and Transatlantic, trade lanes.

As we conclude the fourth quarter, we are now faced with a new trend for spot freight rates on these high volume lanes to the U.S. and Europe. The strong spot market has weakened significantly since July 2017, and has caused many to believe 2018 and 2019 fixed annual contract rates may be lower than 2017’s numbers.

As we approach the Chinese New Year (February 16th) before the contract season starts, shippers may experience a sudden rate increase, due to space and equipment-related issues. It seems likely that this trend will push 2018 fixed contract rates relatively high in the next year.

With new alliances, several new services have been introduced to the market.

This may trigger some short term decreases in Asia to East Coast spot market prices. As the shipping industry realigns itself with a smaller number of stronger, and larger, steamship lines, shippers also need to be careful and observe the effects of this realignment, and whether carrier concentration will play a strong role in negotiations in pricing for 2018.

Orkun Gonen
Orkun Gonen
Orkun is originally from Turkey and raised in the southern coastal city of Mersin, well known for its warm weather, and commercial marine port and free zone. Orkun’s interest in the shipping industry can be traced back to his childhood and his proximity to Mersin Port and free zone operations. He received his Bachelor’s degree in Global and International Affairs from Binghamton University. Orkun also holds a Bachelor’s degree in international relations from Middle East Technical University Ankara. He previously worked for a global container shipping line and a New York City based freight forwarder holding various positions in operations, customer service, and sales. Orkun is currently our award-winning sales executive covering and developing several areas: Texas, Kansas, Missouri, Tennessee, and New York. He travels to each of these locations every month to meet his clients, prospective clients and vendors in-person to ensure harmonious supply chains. Due to his operational background in the shipping industry, his clients appreciate his knowledge as value in their supply chain and lean on his expertise. His customer service background ensures that his clients experience a very pleasant shipping experience based on open communication, proactivity, and the satisfaction of selecting the right service. Orkun is a firm believer in trust built from the promise and delivery. He tailor fits the service specifically for each of his clients, covering all their special expectations and requirements. Fun Facts: His parents tricked him to taking classical music education and piano lessons since the age of 6. In time, he turned his attention onto other musical instruments and genres, but this eventually turned him into a music nerd playing several instruments. In his spare time, he plays piano, guitar, and drums, and goes to concerts.
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