Lower volume, partially explained by factories shutdowns in China and other parts of Asia but also indicative of a longer-term trend, brought down ocean carrier freight rates in the last week.
The World Container Index assessed by Drewry, a composite of container freight rates on eight major routes to and from the U.S, Europe and Asia, was down 2.2% to $1,464.90 per 40-foot container (FEU) for the week ended Thursday.
The average composite index of the WCI, assessed by Drewry for year-to-date, was $1,472 per FEU, which was $93 lower than the five-year average of $1,565 per FEU. One FEU is a 40-foot cargo container or equivalent unit.
The volume decline due to Chinese New Year holidays resulted in a decrease of spot rates on routes originating from Asia this week. Rates on Shanghai to New York fell $107 to reach $2,718 per FEU, and Shanghai to Los Angeles slid to $1,471 per FEU. Similarly, on the Asia-Europe trade routes, rates on Shanghai to Rotterdam fell $56 to $1,684 per FEU.
Rates on Transatlantic Westbound and Eastbound routes stabilized at $2,070 and $501 for an FEU, respectively, Drewry reported. As a result of these rate changes, the Composite Index inched down $32 to reach $1,464.9 per FEU this week. Drewy said it expect rates to soften next week.
Factories in China and Vietnam, the two largest U.S. apparel suppliers, closed for the Lunar New Year that began on Feb. 16, and have historically stayed shut for two to four weeks.
According to the Global Port Tracker produced by the National Retail Federation and Hackett Associates, cargo container imports in March are forecast to be down 2.3% at 1.5 million 20-foot equivalent units (TEU) from a year earlier, when the Lunar New Year fell earlier in the calendar.
Importers will undoubtedly benefit from lower cargo rates, but for carriers it presents risks and challenges.
In issuing profit and earnings guidance last month for fiscal 2018, A.P. Moller – Maersk said they are “subject to considerable uncertainty, not least due to developments in the global economy and the container freight rates.” Maersk said it expects earnings before interests, tax, depreciation and amortization (EBITDA) in the range $4 billion to $5 billion, but warned that a plus or minus shift or $100 per FEU could impact its EBITDA by $1.3 billion.
In its annual report, the company said of its Maersk Line division, “The global container demand was strong in 2017, despite a slowdown in the second half of the year following a strong first half, which resulted in increased freight rates compared to the previous year.”
Freight rates increased across all trades, as East-West rates increased 19.3%, North-South rates increased 8.9% and Intra-regional rates increased 2.4%, Maersk noted. East-West freight rates were driven primarily by Europe trades, while North-South rates were driven by all trade clusters led by West Central Asia and Africa trades.
“The increase in freight rates was a result of a record low level in 2016,” the company said, adding that the reported 2017 freight rates peaked in the second quarter, followed by a slowdown from the beginning of the fourth quarter through the end of the year.
François Girbaud shares with Rivet why he believes fit and function mean more to denim than ever and why he’s eager for newness.Read more
Nike launched Nike Circular Innovation Challenge, a two-part contest that challenges participants to turn grind waste materials into new products or propose innovative material-recovery solutions for footwear recycling.Read more
Nike is shifting its leadership following alleged internal conflict, J.Jill's CEO Paula Bennett is retiring, plus Hugo Boss extended its CEO contract.Read more
Adelante Shoe Co. aims to make footwear shopping more transparent by connecting craftsmen and consumers from point of sale to shoe delivery.Read more
So what's really going on with the retail apocalypse? It really depends on which retailers you're talking about, according to new research from Deloitte.Read more
Following up on its merger this month with the American Fiber Manufacturers, the National Council of Textile Organizations has launched Textiles in the News, a new website promoting the U.S. textile industry.Read more
The challenging retail environment has store executives re-evaluating every aspect of their businesses and Shop.org's “The State of Retailing Online” report highlights retailers' new directions and the areas they say still need improvement.Read more