Was the peak
Despite another round of increases in long-term contractual ocean freight rates on key global trade corridors, month-over-month growth is slowing – and spot rates continue to weaken – suggesting that prices may have peaked. However, according to the latest Xeneta Shipping Index (XSI), which collects real-time data from the world’s major shippers, valid long-term agreements today are 112% higher than at the same time last year. last, and a huge 280% against July 2019.
“Carriers have experienced staggering rate increases, driven by factors such as high demand, lack of equipment, congestion and COVID-related uncertainty, for 17 of the past 19 months,” comments the CEO of Xeneta, Patrik Berglund. “July saw even more bulls across the board, but the signs are clear that there is a ‘shift’ in sentiment as some fundamentals move.”
Explaining, he notes that July’s increases are the slowest since January, with upward pressure on long-term deals easing as spot rates fall on major transactions. Additionally, volumes on many corridors are down, with, for example, European containerized imports down 3%, and exports down 6%, in the first five months of 2022.
“So there are indications that we may have peaked and new deal prices are more likely to hold than jump again, as we have become accustomed to seeing lately,” says -he. “However, this is probably not very comforting to shippers who have been continuously battered by an over-revving market and are now seeing prices stabilizing at historically high levels.
“That said, nothing is certain. US and European ports are still congested, supply chain labor actions are spreading globally, and of course we still have the threat of COVID and its impact on economic activity, particularly in China. There are a lot of variables involved, so staying tuned to the latest information when negotiating long-term contracts is imperative to gaining a competitive advantage.
Xeneta also revealed that it conducted a customer survey in July and found that many were now looking to renegotiate contract rates given recent spot market declines.
“Our customers, primarily high-volume shippers, are now in a stronger negotiating position,” Berglund said. “Our survey showed that 44% no longer have confidence in the stability of long-term contracts – of these 44%, some 22% said they were more likely to allocate lower volumes only to less prices, while 22% preferred to shift allocation to the cash market as soon as prices fall below long-term rates.It’s going to be an interesting few months ahead.
On a regional basis, the July XSI® shows a rise in the global index of 435.2 points and gains, albeit relatively small, on all major corridors.
European imports continued to grow, but at a much slower pace than in recent months, rising 1.9% in July (a 62% year-on-year increase). Exports rose more strongly, by 3.9%, after climbing 92% this year. Far East exports have seen exceptional 12-month growth, now showing a 150% year-on-year increase, with another 2% increase this month (again, a faster rate of increase slow). Imports increased slightly by 1.1% and are now 53% higher than in July 2021.
US benchmarks on the XSI were the best performers, with the import figure up 5.9% (a whopping 173% YoY), while exports also rose 5%. This last reference is the only one to have experienced stronger growth in July than in June. However, Berglund points out that export volumes have declined significantly from pre-pandemic levels, with the ratio of loaded imports to loaded exports to the United States falling from 1.9 in 2019 to 2.5 over the past few years. first five months of 2022.