Sea Level: the ocean blog

Ocean Market Trends Europe – North America East Coast, May 2023

Transatlantic contract vs spot rates

Contract rates from Europe to the North American East Coast continue to show a positive development with significant decreases over the last couple of weeks. Contract rates decreased by 34% since April while spot rates dropped by 19% in the same period. After such a dramatic drop, contract rates are now approaching the level of spot rates. Contract rates will likely drop below spot rates next month, as weak demand and overcapacity are keeping rates at low levels.

Demand vs carrier capacity

High supply and demand imbalances on the market are still keeping the average global rate levels well above what was normal in the years prior to the pandemic. This means that carriers are clearly subjected to supply and demand market forces, while at the same time, carriers have become better at pricing and yield management than they were prior to the pandemic. The pressure exercised by the continued influx of new builds and stalling demolition sales will inevitably take its toll on the market in the coming months. Massive rate declines proved that carriers cannot avoid the game of tough competition, and sticking to pricing policies will cause them to lose business. Considering potential declining demand, lost business (revenues) has multiple effects.

Ocean visibility

My Network Insights moving into Ocean

Shippers and consignees need to get the right goods at the right place at the right time to avoid a loss in sales, avert disruptions in production processes, minimise financial risks based on contractual agreements, and have a reliable forecast of their inventory.

To assess which ocean service to use for your trade lane, e.g. from Asia to Europe, you need access to performance data from which you can learn what your end-to-end transit time performance will look like, including:

• Which trans-shipments are expected to take place?
• What are the expected trans-shipment times?
• What are the transit times of a specific service?
• What is the expected dwell time between discharging a full container and its gate-out?
• What differences in lead time can be observed, based on the carrier or the destination port selected?

Transporeon can provide these insights based on reliable operational data derived from its Ocean Visibility solution, by helping shippers to make the right selections (e.g. on the port of entry into the Hamburg - Le Havre range) or by selecting services that have shown dwell times at a trans-shipment port with moderate variability. Having this dwell time spent at certain TSP locations can give valuable insights if you can route your goods through another TSP that has less dwell time or consider a direct sailing., even if it costs a bit more, but saves on transit time (as sometimes days in transit are not recognised as revenue, increasing your inventory carrying cost).

The extension of Transporeon's My Network Insights (MNI) into ocean enables you to easily visualise where delays are occurring (POL vs POD or in transit), while also supporting discussions with your carriers or forwarders to make any necessary adjustments to processes, vessel routings, or lead times. No matter what the market condition, shippers are always concerned about delays and how to control them. But a delay does not always need to be a problem, as long as you are aware of its impact and can respond proactively.

This is exactly where and how we support your business.