Latest figures from Xeneta show that global long-term ocean rates have fallen by 24% since their August 2022 peak. And although the latest drop in March was merely 0.5%, the firm’s CEO, Patrik Berglund, warns that this should not be seen as a sign of an improving market outlook.
“The principal reason for the relatively small decline is a lack of new contracts entering validity, rather than any strengthening of fundamentals,” according to Berglund. “The major tendering season in Europe has passed, whereas it’s looming large on the horizon for the US market. The prospects of carriers being able to maintain their current long-term rates here look slim, to say the least.”
This time last year, supply chain disruption on top of strong demand led to dramatic increases in contract rates. The XSI import sub-index shot up by 65% during the negotiations of April/May 2022. And although this year’s contracts are likely to be agreed at lower levels, rates still remain firm in a long-term context. Regional sub-indices where this year’s negotiations have been completed show a mixed pattern, with some significant weakening, but they still remain higher when viewed on an annual basis.
Berglund sums up the outlook. “The market is riven by unpredictability, so we need to continue looking to data to map developments. Although the falls in rates will generate the headlines, we have to bear in mind that the carriers continue to make good money on containers tied to long-term contracts. In fact, the global XSI remains a healthy 30.5% up year-on-year.
“However, looking at the hard negotiations that lie ahead, it’s very, very difficult to see how carriers can maintain that elevated level. Unless something drastic happens, I think the long-term contracts in the second half of the year will look very different to those that were valid at the start of 2023,” he concludes.
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