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Sea-Intelligence sees no correlation between reliability and freight rates

The Danish provider of research & analysis, data and advisory services within the global supply chain industry, Sea-Intelligence has conducted a survey to see whether schedule reliability is related to freight rates.

The company analysed the relationship between those two, aiming to see whether periods with high schedule reliability resulted in higher freight rates.

"Whenever there is talk of schedule reliability, shippers have complained about the general lack of service quality in the industry. One debate that often then comes at the forefront, is whether shippers are at all willing to pay a premium for better schedule reliability," noted Alan Murphy, CEO of Sea-Intelligence.

Sea-intelligence did the analysis across seven port-pairs, using its own schedule reliability data and freight rate data obtained from World Container Index (WCI).

"For each of the port-pairs, we used a scatter plot showing the WCI on the y-axis and schedule reliability on the x-axis, also adding in a liner trend line and the coefficient of determination (R-squared) which shows the strength of the correlation," said the Danish researchers.

For nearly all of the port-pairs, the R-squared value was low, denoting weak to no correlation. The only exception to this was Shanghai-Rotterdam, which had an R-squared value of 0.63 as shown below, which, according to the research company, means that roughly 63% of the variation in freight rates can be explained by changes in schedule reliability.

Source: Sea-Intelligence.com, Sunday Spotlight, issue 541

"However, the trend line is negative, which means that during periods with high schedule reliability, freight rates were low and vice versa," pointed out Sea-Intelligence, who also noted that, while there can be exceptions for some specific niche carriers and individual shippers, the broad market trend is quite simple in this respect.

Reliability tends to improve when there is overcapacity, as this makes it easier to adhere to schedule, but this also entails high reliability mainly occurs at points in time, where rates are going down and not going up.

"We saw the same happen during the pandemic, with schedule reliability going up during the early periods with low demand levels and high blank sailings, and schedule reliability dropping considerably as vessels started to sail fuller and berth congestion rose," commented Murphy.





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