- Shippers gear up for annual contract negotiations, armed with new data reports to improve market visibility and decision-making.
- Container Shipping Performance Indicators (CSPI) aim to assist shippers in navigating unpredictable market conditions.
- Over-capacity and softening spot rates in major trade lanes may impact contract negotiations by early 2025.
Logistics managers and major shippers are gearing up for the annual contract season negotiations in Europe and the Pacific, set to begin later this year and in spring 2025. They are preparing new reports and indices to gain better market transparency, reports Seatrade Maritime.
Global Shippers Forum Enhances Market Visibility
James Hookham, Director of the Global Shippers Forum (GSF), announced at the FIATA World Congress in Panama that the GSF is collaborating with MDS Transmodal to provide new reports and indices that aim to enhance shippers’ visibility of market conditions.
These will help shippers better navigate the volatile market.
Impact of Major Events on Freight Rates
Over the past five years, major global disruptions have severely impacted shippers. It includes COVID-19 and the blockage of key trade routes like the Red Sea. These events have sent freight rates soaring, raising concerns that shipping lines are leveraging disruptions for profit.
Despite recent disruptions, shipper confidence is gradually returning. With the launch of the new reports, shippers will have more data at their disposal during negotiations. It enables them to approach the market with greater visibility and confidence.
New Market Reports for Shippers
The GSF and MDS Transmodal are introducing quarterly market reports based on public data and proprietary algorithms to detect market trends.
These reports will help shippers make informed decisions in future negotiations. It offers critical data on trade routes, services, and risk assessments.
“The number of slots available is a quarter of the given capacity on the water,” claimed Hookham, “but the amount that can be booked will depend on the speed of the vessel, the frequency of port calls, which ports, and how many are skipped and blanked sailings, as lines manage the actual capacity and number of slots.”
Container Shipping Performance Indicators (CSPI) Introduced
The GSF and MDS Transmodal have also developed the Container Shipping Performance Indicators (CSPI). It consists of eight indices to assist shippers.
Hookham will present three key indices—capacity, profitability, and connectivity at the congress in Panama.
Challenges in Booking Capacity
Hookham explained that even though a quarter of the shipping capacity is available, other factors such as vessel speed, frequency of port calls, and skipped or blank sailings influence how much capacity is bookable.
Shipping lines will manage three factors to control supply.
CSPI’s Role in Analyzing Market Trends
The CSPI was initially developed during COVID-19 and has since matured, providing data on vessel deployments and trade flows.
Analyst Antonella Teodoro highlighted the impact of the data in informing decisions. Such as influencing the European Commission’s competition policies for carriers.
“Data from the embryonic CSPI was used to analyze the market and that was presented to the EC leading the commission to end the carriers’ block exemption from the European competition rules,” said Teodoro.
Expected Over-Capacity in 2025
MDST’s latest data suggests that by February 2025, new ship capacity will create an over-supply in the market, with utilization rates already showing a decrease across major trade routes.
Pacific utilization is at 70%, Asia to Europe at 80%, and the westbound Atlantic at 65%.
“There is likely to be severe over-capacity by February next year with the newbuild capacity being deployed, there will likely be disruption from the US East Coast strike, but I don’t think this will be serious enough, or long enough, to bring similar levels of disruptions as seen during the pandemic,” said Teodoro.
Teodoro, meanwhile, confirmed, “In 2020 there were virtually no vessels available and utilisation was over 90% this is a major difference between then and today’s market.” Ultimately that lack of available tonnage drove rates to record levels.
Market Shifts Impacting Spot Rates
With new ship capacity being deployed and existing capacity standing at nearly 31.6 million TEU by February 2025, there would be a significant drop in spot rates.
This market softening could have a ripple effect on contract negotiations, particularly in the Asia-to-Europe trade lanes.
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Source: Seatrade Maritime
