Will the shipowner significantly reduce the freight?

Worried about the deterioration of the market, shipping companies "first" reduced the spot freight, thus weakening the price competitiveness of freight forwarders. However, the supply chain bottleneck may support the long-term contract rate to "save the day" for the carrier.

Mr. He, executive director of Hong Kong Shippers Committee, said that although the freight of shipping companies has dropped by 30%, the freight forwarder "refused to reduce the freight". He added: "Freight forwarders refused to reduce freight rates, but carriers took the lead-the freight rates they offered to BCO this year were more competitive than freight forwarders, which reflected the desire of shipping companies to ensure the supply of goods even though they were worried about the deterioration of the market."

Peter san Dala, head of global shipping for a major Singaporean shippers, said that so far, the carrier has not given "any indication" to reduce the long-term contract rate. "The spot rates of most trade routes have dropped by 5%-10%, but only the spot rates in trans-Pacific region are lower than the contract rates," he said. The gap between Asia and Europe has narrowed, but the spot exchange rate is still slightly higher. "The main reason is that the port congestion in Europe is now much more serious than that on the west coast of the United States." He added that he believed that "the only thing that prevented" operators from having to reduce their rates was the bottleneck, adding: "It was largely due to port congestion in Europe and the east coast of the United States. "But now we have heard the news about Covid-19 in South China again. If Yantian is affected, it will be another potential disturbance. Therefore, if you are an operator now, then you have no real motivation to reduce the contract rate.

There is a lot of talk about economic recession and market weakness, which may be the case. But at the same time, other market goods, including raw materials, are still fluctuating. "On the whole, supply chain challenges still exist, and I think this will bring buffer time for operators."