- The ocean container spot market, having faced challenges in 2023, witnessed significant declines, affecting carriers, including Zim Integrated Shipping.
- For instance, Zim experienced a 61% year-over-year reduction in third-quarter revenue, emphasizing the impact of spot exposure.
- The Freightos Baltic Daily Index from China to the North American west coast also showed a 69% year-on-year decrease in the third quarter.
Surge Amid Red Sea Conflict
While ocean spot pricing had been declining for over two years, the Red Sea conflict caused by Houthi rebels firing on cargo vessels created a sense of urgency and chaos. This situation allowed ocean carriers to invoke a level of pricing power not experienced since mid-2022. The Global Composite Index from Drewry increased by 170%, reaching $3,732.70 per twenty-foot equivalent unit in the first six weeks after the Houthi attacks began.
Short-Term Windfall and Carrier Strategies
The rapid increases in spot rates provided a short-term windfall for carriers with spot exposure, offsetting rerouting costs around the Cape of Good Hope instead of navigating the Suez Canal. Carriers with heavier reliance on the contract market did not witness similar boosts in contract pricing. Despite this, carriers like Hapag-Lloyd announced surcharges, indicating efforts to generate more revenue.
Post-Lunar New Year Outlook
With the Lunar New Year complete, questions arise regarding the strength of demand post-holiday and its impact on spot rates. Global spot rates have experienced declines since early February, indicating a potential conclusion to the period of heightened pricing power. The recovery from the Lunar New Year will play a pivotal role in determining the direction of ocean container spot rates in the coming months.
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Source: Freight Waves
