Higher Volumes Anticipated for Peak Season but will Rates Follow Along?

2016 was a year many ocean carriers would rather just forget — historic low rates, a number of acquisitions along with a bankruptcy and heavy financial losses. Peak season, the period that traditionally runs from August through mid-October is usually a time in which volumes are the heaviest, rates are higher, and capacity can be tight. Will the 2017 peak season surprise us?

Increasing Volumes

Expectations for a strong peak season are running high as Chinese port throughputs through June are higher than the same period in 2016. According to the Journal of Commerce, ports in Shanghai, Shenzhen, Ningbo-Zhoushan, and Guangzhou handled 870,000 more TEUs during the month versus June 2016. Although not all of the total increase was destined for Europe. However, Shanghai did experience a 7.4% year-over-year increase with about 250,000 more boxes destined for Europe.

“We’re hearing that the next two-to-three months could set new containerized import records in the U.S.” — Port of Oakland, Maritime Director John Driscoll

Indeed, the US ports are also noting higher import volumes. The Global Port Tracker in partnership with the National Retail Federation (NRF), reported the following statistics:

The NRF noted that the August estimate would be the highest monthly volume recorded since NRF began tracking imports in 2000, besting the 1.73 million TEU seen in March 2015. The 1.7 million-plus numbers seen in May, July, August, and October represent four of the six busiest months in the report’s history.

Are Rates Adjusting to Demand?

All of this volume is good news for ocean carriers right? Depends on who you ask. Despite the higher volumes, carriers have not been successful in achieving rate increases on the Europe and Mediterranean lanes in particular. Rate increases in June and July failed to make an impact and expectations that the August 1 rate increase will flop as well.

The Journal of Commerce notes that a potential reason for the failure for rates to stick is capacity. Despite adjustments being made due to the new alliances, consolidation and market demands, Alphaliner reported that MOL and Maersk recently introduced capacity within the Asia-Europe trade lanes. Maersk, for example, received its third out of eleven ordered vessels that have a capacity more than 20,000 TEU each.

Meanwhile, according to Katherine Barrios, chief marketing officer at ocean freight benchmarking firm Xeneta, its crowd-sourced data showed the market “continuing to pick up”, and that long-term contract rates were “expected to continue increasing”. Besides, Xeneta data showed that the average on the short-term market was almost four times higher than a year ago, which “could be a windfall for shipping lines.

Despite current GRIs not sticking, the market is a rising one as noted by Xeneta’s Katherine Barrios. As such, more money will need to be paid out in order to ship freight. Low priced deals still exist, but those are tightly controlled by volumes.

Find Out More

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