OIL PRICES AND THE EFFECT ONFREIGHT RATES

(PART 2)

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At Xeneta we believe there is an untapped potential for everyone in the industry, to systematically learn from our individual and collective efforts. We hold true that "if you cannot measure it, you cannot improve it". That’s why we think actionable metrics is the key to continuously evolve for every business, and ultimately the entire industry. Rethinking global logistics is the vision of Xeneta.

With international experience from the logistics industry, we have first-hand knowledge of the challenges related to high volatility and lack of transparency in the ocean freight market. By combining logistics background and information technology expertise, we found the solution to these challenges.

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FREIGHT RATES?

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AN IN-DEPTH LOOK AT THE FALLING PRICE OF OIL AND

ITS EFFECT ON THE LOGISTICS INDUSTRY.

SEE PART ONE

LOWER FORECAST FOR GLOBAL ECONOMIC

GROWTH

DON’T RELYPREDOMINANTLY ON OIL, BUT IT DOES MAKE UP A BIG PORTION OF THEIR REVENUE THROUGH FUEL SURCHARGES.

WITH LITTLE SURCHARGES TO DRAW ON, MANY RAIL COMPANIES ARE LOOKING AT A GRIM YEAR.

FARING BETTER, AS LOW FUEL PRICES DROP OPERATING COSTS AND ALLOW THEM TO REWORK THEIR OPERATIONS TO BETTER SUIT THEIR CUSTOMERS.

STILL HAS A LONG WAY TO GO BEFORE THEY EVEN OUT. WEAK DEMAND AND OVER-CAPACITY PLAGUING THE OCEAN CARRIERS, CAUSING THEM TO EITHER BAILOUT, CONSOLIDATE, OR BOTH.

RAIL COMPANIESTRUCKING INDUSTRY

OCEANIC FREIGHT

THE INTERNATIONAL MONETARY FUND HAS RECENTLY LOWERED ITS FORECAST FOR GLOBAL ECONOMIC GROWTH THIS YEAR DOWN TO 3.4%, AND ONLY 3.6% FOR 2017.

THAT WOULD TRANSLATE TO APPROXIMATELY 4% CONTAINER

GROWTH FOR THE YEAR, ROUGHLY HALF OF THE CAPACITY GROWTH

FOR THIS YEAR.

- Peter Sand, the chief shipping analyst at BIMCO

THIS, HOWEVER, IS NOT A NEW TREND AS SHIPPING HAS BEEN DWINDLING SINCE 2000-2008 WHEN THE GDP-TO-TRADE MULTIPLIER WAS AT 2.2, DOUBLE ITS CURRENT STANDING.

DON’T RELYPREDOMINANTLY ON OIL, BUT IT DOES MAKE UP A BIG PORTION OF THEIR REVENUE THROUGH FUEL SURCHARGES.

WITH LITTLE SURCHARGES TO DRAW ON, MANY RAIL COMPANIES ARE LOOKING AT A GRIM YEAR.

FARING BETTER, AS LOW FUEL PRICES DROP OPERATING COSTS AND ALLOW THEM TO REWORK THEIR OPERATIONS TO BETTER SUIT THEIR CUSTOMERS.

STILL HAS A LONG WAY TO GO BEFORE THEY EVEN OUT. WEAK DEMAND AND OVER-CAPACITY PLAGUING THE OCEAN CARRIERS, CAUSING THEM TO EITHER BAILOUT, CONSOLIDATE, OR BOTH.

HOW IT WILL AFFECT THE SHIPPING INDUSTRY

LAST YEAR SAW 1.67 MILLION TEUS OF CAPACITY BEING ADDED TO THE GLOBAL FLEET, INCREASING ITS SIZE BY A TREMENDOUS 8.1%.

IN 2016, GROWTH SHOULD SLOW TO 850,000 TEUS, COMPRISED MOSTLY OF THE OVERLY ABUNDANT 8,000-PLUS TEU CATEGORY AS THE TREND FAVORING BIGGER SHIPS CONTINUES. (SOURCE: BIMCO)

WHILE THIS MARKS A RECORD LOW FOR FLEET GROWTH, IT STILL ISN’T EVEN CLOSE TO BEING ENOUGH TO OFFSET THE WEAK GROWTH OF CARGO DEMAND.

WHILE FUEL ISN’T AS BIG A FACTOR FOR RAILWAY COSTS, IT DOES MAKE UP APPROXIMATELY 20 PERCENT OFTOTAL OPERATING COSTS, AND CONSTITUTES A MAJOR LINE ITEM FOR RAIL COMPANIES

PROSPECT OF EUROPEAN GROWTH

THIS, HOWEVER, IS NOT A NEW TREND AS SHIPPING HAS BEEN DWINDLING SINCE 2000-2008 WHEN THE GDP-TO-TRADE MULTIPLIER WAS AT 2.2, DOUBLE ITS CURRENT STANDING.

PRIVATE CONSUMPTION IN EUROPE HAS BEEN STEADY OVER THE PAST YEAR SO EVENTUALLY

DEMAND SHOULD COME BACK. AT WHAT LEVEL AND WHAT TIME REMAINS UNCERTAIN. WHAT

REMAINS CERTAIN IS THE SOONER, THE BETTER.

- Peter Sand, the chief shipping analyst at BIMCO

WITH THE PROSPECT OF EUROPEAN GROWTH CONTINUING COMBINED WITH THE U.S. ECONOMY MAINTAINING STEADY IMPROVEMENT, THE HOPE REMAINS THAT CONSUMER DEMAND WILL CONTINUE TO GROW AND EQUILIBRIUM WILL STABILIZE THE FREIGHT AND LOGISTICS SECTOR AS A WHOLE ONCE AGAIN.

LEARN HOW XENETA CAN HELPYOU GET INSIGHT AND

INTELLIGENCE INTO YOUR GLOBAL OCEAN FREIGHT PRICES AND CHANGE YOUR LOGISTICS

BUSINESS:

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