Anyone in the Freight Forwarding industry will concur that we came out of 2016 feeling bruised by the constant disruption in the ocean arena from the instability of freight rates to the demise of Hanjin Shipping and the many mergers and acquisitions either underway or on the horizon.
The announcement of the three new shipping alliances from April 2017 made us consciously aware of the carriers’ resolve and strategy to revive freight rates through capacity reduction and control. We recognised that change was needed and inevitable to ensure no repeat of the trend in volatility as previously seen and that we were heading for interesting times in 2017.
The first challenge in 2017 came with the timing of Chinese New Year. Being at the end of January it was always going to be perfect timing to help strengthen the carriers’ resolve for driving freight cost up. The introduction of Blank Sailings immediately after Chinese New Year gave the carriers revived impetus to slow down the subsequent freight softening that usually follows this annual spike.
Volatility brings very few benefits when the SCFI Spot rate drops as it only diminishes the focus for customers to see beyond price and to recognise the benefits of maintaining agreements, noting the benefits that loyalty bring in terms of continuity of service and space protection. It is easy to lose sight of how quickly market conditions can change.
It is predicted that the Asia-North Europe capacity growth will reach 11% in Q4 and we are yet to see any service withdrawals and only a few Blank Sailings for this winter slacks season, as seen over the last four years. Strong volume growth, as seen across among the regions, China ports (including) Hong Kong at 9.3% in Q3 has given the carriers renewed confidence to retain additional capacity in the trade. This falls perfectly with expectations raised by the IMF of global growth/trade which will have an impact in freight prices.
With Q4 freight rates naturally softening, the carriers have struggled to capitalise on the increase in demand. They really need to maintain perception and momentum if they are to see an increase in freight cost in 2018 but so far the signs are positive for them to have some success in this area.
From NNR’s perspective, we end 2017 with mixed feelings noting the demise of the beloved G6 Alliance, an institution that we had worked with so closely and the comfort of being to roll off without a thought all the loops and transit times that have served us so well. We have come through the changes and the settlement of the New Alliances which were not as disruptive as we first surmised.
We believe that 2018 will continue along the path of improved stability in both cost and services as each carrier pushes to settle their allocations and to establish their presence in the market. We have high expectations, assuming the similar business ethos, that the Ocean Network Express (‘ONE’) will settle their joint venture in Q2 smoothly, noting they share the same Japanese principles and group-oriented culture which is valued over individualism, to deliver greater success.
We look forward to 2018 with renewed interest and ready for the challenges that it will bring. The challenge will be to keep the momentum as we head out of 2018 into 2019, and the introduction of further Mega ships of 22,000 TEUS-plus into the trade.
NNR continue to resist entertaining the ‘cheap sell’ strategy as it is far removed from the Japanese etiquette of business and NNR’s position as a premium brand, instead positioning ourselves as a reliable partner in the sometimes-choppy waters of ocean freight.
NNR currently boast over 50 offices throughout Asia, each working tirelessly to maintain the ocean freight etiquette promoted at NNR. Our pragmatic approach has been recognised recently at various Industry Award programmes, something else we are very proud of.
Janette Page, UK Ocean Development Manager, NNR Global Logistics