Long-term Shipping Rates Finally Peak, But Still Up 112% Y-o-Y: Xeneta

Despite another slew of rises in long-term contracted ocean freight rates across key global trade corridors, month-on-month growth is slowing - and spot rates continue to weaken – suggesting prices may have peaked.

However, according to the latest Xeneta Shipping Index (XSI^®), which crowdsources real-time data from the world’s leading shippers, today’s valid long-term agreements stand 112% higher than this time last year and a massive 280% up against July 2019.

Shifting Fortunes?

Xeneta CEO Patrik Berglund commented: “The carriers have enjoyed staggering rates rises, driven by factors such as strong demand, a lack of equipment, congestion and COVID uncertainty, for 17 of the last 19 months.

“July has seen yet more upticks across the board, but the signs are clear there is a ‘shift’ in sentiment as some fundamentals evolve.”

Explaining, he notes that July’s increases are the slowest since January, with upward pressure on long-term agreements easing as spot rates fall across major trades.

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In addition, volumes on many corridors are down, with, for example, containerized European imports falling by 3% and exports 6% in the first five months of 2022.

Cold Comfort

Berglund adds: “So, indications are there that we may have reached a peak and that prices of new agreements are more likely to hold than suddenly leap up again, as we’ve become accustomed to seeing of late.

“However, that’s probably of little comfort to shippers that have been continually battered by a market in overdrive and now see prices stabilizing at historically high levels.

“That said, nothing is certain. US and European ports are still congested, industrial action on the logistics chain is spreading globally, and, of course, we still have the threat of COVID and its impact on economic activity, particularly in China.

"There’s a lot of variables at play, so it’s imperative to stay tuned to the latest intelligence when negotiating long-term contracts to achieve a competitive edge.”

Tough Talks On The Horizon

In a further market insight, Xeneta also disclosed that it ran a survey to attendees of its monthly customer webinar in July and found that many were now looking to renegotiate contracted rates given the recent spot market drops.

Berglund reveals: “Our customers, mainly large volume shippers, now find themselves in a stronger negotiating position.

"Our survey showed that 44% no longer feel confident in the stability of long-term contracts - of that 44%, some 22% said they were more likely to allocate lower volumes only to cheaper contracts, while 22% preferred to move allocation to the spot market as soon as prices dip below long-term rates.

"It’s going to be an interesting few months ahead.”

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