Rising Long-Term Container Shipping Rates Signal Shift In Market Dynamics

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Mfame Editor
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The container shipping market is experiencing a notable shift as long-term ocean freight rates begin to rise, narrowing the gap with previously volatile short-term rates. This change is highlighted by the Global XSI® (Xeneta Shipping Index), which tracks long-term contract rates. The index saw a significant increase in July, particularly for Far East exports, amidst softening short-term rates.

Rising Long-Term Rates

In July, the Global XSI® increased by 2.5% to 151.5 points, although it remains 4.0% lower than December last year. The Far East Export sub-index, which includes major fronthaul trades to Europe and the US, saw a substantial rise of 12.6%, reaching 178.8 points. This increase signals upward pressure on long-term rates, even as short-term rates begin to soften, reflecting a shift in market dynamics.

Regional Market Trends

  • Far East Imports: The sub-index for Far East imports dropped to 94.1 points, marking a 15.7% decrease from June and reaching its lowest level since Q1 2020.
  • US Imports: US imports XSI® rose by 6.4% to 161.3 points in July, recovering from a low of 147.9 points in May, though still 30.4% lower than the previous year.
  • US exports: The sub-index for US exports fell by 10.2% to 108.8 points, marking its lowest level since October 2021.
  • European Imports: The European import sub-index increased by 2.7% to 167.5 points, reversing two months of decline.
  • European Exports: The European export sub-index decreased by 4.8% to 114.6 points, continuing a five-month downward trend.

Market Implications

The narrowing gap between long-term and short-term rates raises questions about future rate trends. Shippers hope for a reduction in spot rates, while carriers aim to maintain elevated short-term rates. The upward pressure on long-term rates suggests potential changes in contract negotiations and pricing strategies. As the market adjusts, stakeholders must navigate these dynamics to optimize shipping strategies and manage costs effectively.

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Source: XENETA