Looking at the most recent data for spot freight rates from the Far East to Europe, it is becoming apparent that traders are finding it cheaper to send their cargo to ports in Northern Europe as opposed to Mediterranean ports.
Here is a brief analysis of why this is happening and what we might expect in the near future.
Historically, it has always been a cheaper strategy to send cargo to Southern Europe and then complete the route to the final destination further north by land; the fact that Far East traders are choosing Northern European ports over Mediterranean locations is only a recent development.
Both rates have gone down in recent months, but where the decrease in spot freight rates from the Far East to the Mediterranean is of the order of magnitude of 850 dollars per Feu, the drop in rates to Northern Europe has been much sharper, with prices going down as much as 3,600 dollars per Feu.
The divide between the two decreases in freight rates is large enough to make it cheaper for a trader wanting to send merchandise from the Far East to Europe to choose a northern location, for a cost of 11,100 dollars per Feu, than one in the Mediterranean, which may cost as much as 13,100 dollars per Feu.
According to the research and analysis firm Xeneta, spot freight rates to Northern and Southern Europe have long been roughly in the same price range, with the Mediterranean generally proving somewhat cheaper; this large divergence is a recent phenomenon and, as Xeneta analysts believe, probably a short-term one.
The significant difference may be explained in part by an increase in the total trade volume between the Far East and Southern Europe, which tends to drive freight rates up, but researchers at Xeneta find it unlikely that the upwards trend will continue and expect the divide to grow smaller again eventually.
Interestingly, the new trend in spot freight prices does not seem to apply to long-term freight rates, in which the routes from the Far East to the Mediterranean continue to be cheaper (7,000 dollars per Feu despite a 6% increase since the beginning of the year) than the ones to the Northern Range (8,000 dollars per Feu, which is a 1% decrease since the same date).
If the changing trends in freight rates between the Far East and Europe affect your business, stay tuned: we at Global Shipping will be happy to provide the latest news for you to stay up to date on the situation.
