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July 6 2020

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July 6 2020 | The Journal of Commerce 15 International Maritime 1 percent higher than during the same week last year at $2,398 per FEU, according to Drewry's World Con- tainer Index (WCI). Headhaul rate levels, averaging $2,386 over the past 12 months, illustrate pricing stability in the face of volatile volume. Since January, the rates tracked at the JOC Shipping & Logistics Pricing Hub, have fluctuated within a narrow band of $2,188, a 2020 low reached on Feb. 6, and $2,592, a high reached on May 7 and May 14. Patrik Berglund, CEO of Xeneta, an ocean and air freight rate platform, said there have been no significant changes in the short-term market since Jan. 1. "The average price for an FEU from North Europe to US East Coast ports has dropped 3 percent since Jan- uary, and [as of June 16] is at $1,920," he told The Journal of Commerce. "The contract market has seen no change for the same time period." JOC email: twitter: @greg_knowler Germany said its volume on the trans-Atlantic declined 65 percent from February through May and predicted that some of the blanked sailings would not be reinstated before the end of the year. But the blank sailing programs on the trans-Atlantic have had the same effect as the extensive capacity withdrawals on the trans-Pacific and Asia–Europe trades. Even with a sig- nificant drop in demand, rates from Rotterdam to New York are currently the coronavirus pandemic led to all non-essential businesses being closed, including vehicle manufacturing plants and the spare parts industry. Those factories resumed production in mid- May at a lower level because of weak demand and social distancing require - ments limiting worker numbers. The wider auto sector provides direct and indirect jobs for 13.8 mil- lion people in the European Union, with vehicle makers operating 229 vehicle assembly and production plants across the region, according to the European Automobile Manufac- turers' Association (ACEA). "If this situation persists," the association said, "the sector risks a meltdown with large-scale bankrupt- cies and restructuring. During the financial crisis from 2008 to 2013, the automotive sector lost 440,000 jobs in car production and the aftermarket. If no measures are taken, this number risks being dwarfed by the current recession, which may be much deeper." A global forwarder based in Expectations for container line losses of as much $23 billion have been dramatically revised to reflect rates that continue to rise despite declines in volume. US imports of automobiles and parts from Europe crashed 40 percent in the first five months of 2020. taken from the management team across the sector," he said. "I think if you asked most people 12 months ago what the end result of a period such as this would produce, higher freight rates would have been at the end of that list. "Clearly we need to continue to watch this very closely," Glynn added. "But I do think that the culture of the industry leaders has actually changed, which is resonating in freight rate management. The second half may turn out to be worse than we expect, but I have certainly gained some confidence through the first half of this year." Volume downgrade IHS Markit, parent company of The Journal of Commerce, on May 20 downgraded its outlook for interna- tional trade volumes in 2020 because of the COVID-19 impact on demand, forecasting a 10.1 percent year-over- year decline after predicting a 2.1 percent increase as recently as Feb- ruary. The revised forecast expects container volumes to rebound by 10.3 percent and 4.4 percent in 2021 and 2022, respectively, before settling into low-single digit growth. US imports from Asia plunged 18.5 percent in May after declining 1.7 percent in April and 18.3 percent in March, according to PIERS, sister company of The Journal of Com - merce within IHS Markit. To match the declining demand, carriers announced 74 blank sailings from Asia to North America for April and May, according to Sea-Intelligence. On the Asia–Europe trade, the latest volume data available from Container Trades Statistics (CTS) show volume declining 20 percent year over year to 1.14 million TEU in April. THE Alliance of Hapag-Lloyd, Ocean Network Express, Yang Ming, and HMM, and the 2M Alliance of Maersk Line and Mediterranean Shipping Co., will cancel 75 sailings through September in a bid to match capacity with weak anticipated vol- ume levels. Maersk said June 17 that healthier-than-expected container volumes were behind the carrier's upgrade of its second-quarter out- look, with volumes now expected to be down only 15 to 18 percent from the 2019 period. That compares to the initial outlook of a 20 to 25 percent decline the carrier released May 13. Container shipping line exec- utives said in late May they were confident the industry would be able to withstand a double-digit volume decrease this year. The heads of CMA CGM, Hapag-Lloyd, and Maersk Line said the ability to quickly match capacity with demand and avoid price wars has left the industry in a better position to shrug off the volume declines of the second quarter and build on recovering demand through the rest of the year. JOC email: twitter: @greg_knowler

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