- Xeneta’s Shipping Index (XSI), tracks real-time rates developments monthly.
- Global long-term contracted rates increased for the first time in 12 months.
- This raises the question of whether it was a sign of a resurging market or merely a temporary halt in its decline.
Any hopes of a revival in long-term ocean freight shipping rates were short-lived after the latest data from Oslo-based container shipping analyst Xeneta indicates the market is once again in decline, sources Riveramm.
Sustained Rate Increase
But September’s flattering figures were followed by October’s XSI numbers, showing a further dip of 2.6%, falling to 165.3 points. Xeneta market analyst Emily Stausbøll said while carriers have had some success in capacity management, limiting the impact of the 3.3% decrease in global shipping volumes year to date, “this hasn’t been enough to support sustained rate increases on a global basis.” She added, “The answer to the contrasting fortunes on the XSI in September and October could be found in the Far East, where we saw some unusual, and seemingly one-off, behaviours. For example, South Korea to Australia and New Zealand grew 2% in September yet dropped 31.1% in October.”
Container shipping, which saw an inordinate boom in the pandemic years due to skewed supply chains, has been hit by several challenges in the last year. The industry invested heavily in new box ships during the boom with many entering the market this year and more due before the end of 2025. But those ships are entering a faltering market reeling from the impact of global inflation and high-interest rates. This week, Japanese container shipping alliance Ocean Network Express (ONE) reported a 97% decline in net profit for Q2 2023 as plummeting demand across the busy trade routes of Asia and North America hit earnings. And over at AP Moller-Maersk, the company said it plans to shed up to 3,500 jobs, with up to 2,500 to be carried out in the coming months and the remaining extending to next year.
Rough Road Ahead
European imports were the only XSI sub-index to grow in October, up by 3.0% to 187.5 points. However, Xeneta said European exports fell 11% in October. Ms Stausbøll said, “To provide an example of the dire situation carriers find themselves in, the average of all valid long-term rates between North Europe and China is US$95 per FEU, excluding terminal handling charges.” “With rates at such a low level, it becomes clear carriers are transporting goods across the world at below cost and are effectively subsidizing shippers on this backhaul trade.”
The Far East market could get even more painful with exports from the region falling 6.9% in October to 152.8 points on the XSI – a 75.1% drop from a year ago, and the lowest this index has been since January 2021. Meanwhile, US imports fell 3.4% to 186.8 points on the XSI in October. Carriers have prioritized removing capacity from this high-priority trade – often sacrificing profitability on other smaller trades.
Freight shipping firms have already endured 62.2% being wiped off market prices in the past 12 months and Xeneta expects the situation may get worse before it gets better. Xeneta expects significant changes in the New Year following the tender season when, Ms Stausbøll said, “many shippers will be signing new contracts at lower rates than the ones they are replacing.”
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