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Ocean Freight Rates Remain at High Levels, Hitting Carrier Profits

In the midst of the peak season for ocean freight, container freight rates are down slightly this week, though higher than this time last year.

The World Container Index (WCI) assessed by Drewry—a composite of container freight rates on eight major routes to and from the U.S., Europe and Asia—was down 0.3% to $1,753.96 per 40-foot container or equivalent unit (FEU) for the week ended Thursday. Compared to a year earlier, the WCI was up 13.8% up.

For the year to date, the WCI was $1,425 per FEU, which is $95 lower than the five-year average of $1,520 per FEU.

Freight rates on most trade lanes remain unchanged compared with last week. However, rates on Shanghai to Los Angeles were down $14 to $2,182 per FEU. Similarly, rates on Shanghai to New York dropped $29 to $3,400 per FEU. Drewry said it expects rates to remain stable for the next week.

Bunker fuel prices have been helping to drive up the prices in the long term. Currently sitting at about $440 a ton, bunker fuel prices had dipped to around $18 a ton in mid-June after rising to recent highs in May, which was a steep climb from around $350 per ton in March.

Those bunker fuel prices had an impact on A.P. Møller – Mærsk in the quarter, too.

In reporting its financials, with second quarter revenue increasing 24 percent to $9.5 billion, Søren Skou, CEO of A.P. Møller – Mærsk, said, “Profitability was significantly impacted by higher bunker prices in Q2 and remained at unsatisfactory levels. For the rest of the year, we expect improvements in our profitability driven by lower unit cost and higher freight rates.”

The company reported earnings before interests, tax, depreciations and amortization (EBITDA) was down 18 percent to $883 million. Combined with the development in freight rates and uncertainties related to trade tensions, Maersk said that led to a downward adjustment in the expectation for EBITDA for the full-year to reach in the range of $3.5 billion to $4.2 billion.

The company said full-year guidance continues to be subject to uncertainties “due to the current risk of further restrictions on global trade and other factors impacting container freight rates, bunker prices and rate of exchange.”