The container shipping industry is witnessing a growing divergence between freight rates and container-ship charter rates, a gap that analysts believe will close through a much-needed market correction, reads a Drewry release.
Escalating charter rates
In recent years, charter rates have escalated sharply, even as spot freight rates have entered a more cooling phase. Charter rates today remain about 200 percent higher than in 2019, despite the fact that freight rates are showing signs of strain. This unusual decoupling is largely due to the nature of charter contracts, many of which are negotiated for multi-month or multi-year durations—thus making them slower to respond to short-term swings in the freight market.
At the heart of this split is tight vessel availability and structural rigidity on the supply side. Major liner operators, such as MSC and CMA CGM, have been absorbing second-hand vessels, effectively reducing the pool of tonnage available to non-operating owners. Over time, the share of fleet controlled by liner operators has increased materially, thereby constraining market liquidity and enabling owners to demand premium rates regardless of weaker spot demand.
Geopolitical disruptions have also contributed to the squeeze. Trade routes have been disrupted—especially by security challenges like those in the Red Sea—forcing some ships to navigate longer routes via the Cape of Good Hope. These extended transit times reduce effective available capacity and make scheduling more unpredictable, lifting demand for both spot and time-chartered tonnage.
Predictability over exposure to spot market fluctuations
Another significant factor is how carriers are adapting their strategies. To manage volatility and ensure continuity, many are locking in long-term charters, preferring predictability over exposure to spot market fluctuations. At the same time, regulatory pressure from emissions rules—particularly under IMO and the EU’s emissions trading schemes—is elevating demand for dual-fuel and fuel-efficient vessels, which further tightens supply of compliant ships.
So when might the charter and freight markets realign? Drewry expects that the dislocation may persist through the next year, as carriers maintain long-duration commitments. Forecasts suggest that while charter rates may see modest growth, global freight rates (both spot and contract) may decline by approximately 16 percent year over year.
Eventually, the market dynamics are likely to force a reckoning. As demand growth slows, profit margins tighten, and newbuilding deliveries ramp up, some of the long-term chartering appetite will ebb. That, in turn, could unwind the lofty charter valuations that have prevailed through the boom years.
Did you subscribe to our daily Newsletter?
It’s Free — Click here to Subscribe!
Source: Drewry
