As the ongoing trade war between the US and China continues to send tremors of uncertainty through the global economy, Xeneta is advising senior executives to keep a close eye on fluctuating ocean and air freight rates. In an unpredictable geopolitical environment, highlighted by last week’s arrest of Huawei’s CFO in Canada, the leading freight rate benchmarking and market intelligence platform says shippers need agile logistics strategies, with the option of shifting transportation mode whenever necessary.
“Nobody, not even the opposing sides in this evolving economic conflict, seems to know what is going to happen next,” said Xeneta CEO Patrik Berglund. “At the beginning of December we had Presidents Trump and Xi hailing an apparent ceasefire at the G-20 meeting in Argentina, only for the Huawei case to quickly illustrate that hostilities are far from over.
“The 90-day breathing space the U.S. has given China with regards to the next round of tariff hikes may or may not last that long, and in the meantime that will lead to a rush to fulfill shipments and avoid the looming taxes. Which, in turn, has an obvious impact on shipping rates.”
The point, Berglund says, is that rapidly changing geopolitics demand limber logistical approaches.
“Some cargoes have to be moved by ship, due to volume and safety issues, whereas others have to be carried by air, e.g. if they perish rapidly (such as certain flowers or pharmaceuticals). However, there’s a surprising overlap with fashion, small electronics, toys and much, much more than can ship irrespective of mode.
“What executives, particularly CFOs, must bear in mind is what mode suits their immediate business needs. Is there immediate demand that can be met, and a competitive advantage that could be gained, by utilizing airfreight? Could new tariffs or restrictions be avoided by taking the plane? Or could costs be cut and financial risks, and/or inventories, be better managed in the current climate by looking to the ocean?
“By accessing the very latest intelligence on both modes shippers can constantly re-evaluate their options in relation to costs for transportation and costs for capital i.e. transit time / lead time. This enables fully informed supply chain decisions that support smart Working Capital Management and Inventory strategies. In other words, providing a degree of certainty in an uncertain world.”
The latest data from the recently launched Xeneta Shipping Index (XSI) Public Indices report (released in the final week of each month) for the month of November showed an increase in overall global ocean freight rates after three months of falls. The US export index in particular showed a strong increase, climbing by 3.1%.
Alongside the firm’s exclusive ocean rate data, with over 85 million contracted freight rates covering around 160,000 port-to-port pairings, Xeneta is rapidly building the market’s leading air freight rates analysis service, with over 350,000 contracted rates acquired in the past few months since its launch. This allows platform users to compare markets, benchmark their own rates and save costs by entering freight negotiations with a clear overview of current pricing.
“We have entered a period of increased complexity and volatility,” Berglund concludes, “with regard to rates as well as politics. In this climate shippers need an in-depth, multi-layered understanding of market intelligence to get the deal that’s right for them. And at the end of the day, that’s what this is about for everyone.”
