Any hopes of a revival in long-term ocean freight shipping rates were short-lived after the latest data from Oslo’s Xeneta indicated the market is once again in decline.
Real Time Rate
In September, the Xeneta Shipping Index, which tracks real-time rates developments on a month-to-month basis, revealed global long-term contracted rates had increased for the first time in 12 months. This raised the question of whether it was a sign of a resurging market or merely a temporary halt in its decline. It now appears September was indeed a false dawn after data released by Xeneta this week showed October reverted to a now familiar downward trend with the Global XSI dropping by 2.6% to 165.3 points.
Emily Stausbøll, Xeneta Market Analyst, said: “Carriers have had some success in capacity management, limiting the impact of the 3.3% decrease in global shipping volumes year to date. However, this hasn’t been enough to support sustained rate increases on a global basis.
Calm Before The Storm
Freight shipping companies have already endured 62.2% being wiped off market prices in the past 12 months and, far from the tides turning in their favor, the situation may get worse before it gets better. Stausbøll said: “Significant changes in Global XSI® will come in the New Year following the tender season when many shippers will be signing new contracts at lower rates than the ones they are replacing. “For example, last year the index fell by 0.6% in October, while in January it fell by 14.7%. This was then followed by an even bigger drop in May when it fell by 27.5%, driven by the large number of new contracts with shippers in the US…”
Dire Situation
European Imports was the only XSI® sub-index to grow in October, up by 3.0% to 187.5 points. However, when we turn our attention to European exports the story is very different, falling by 11% in October to 164.3 points. 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 USD 95 per FEU, excluding terminal handling charges. “With rates at such a low level, it becomes clear that carriers are transporting goods across the world at below cost and are effectively subsidizing shippers on this backhaul trade.”
Import Risk
US imports fell 3.4% to 186.8 points on the XSI® in October – but without successful capacity management by carriers the situation could have been much worse. With volumes dropping 15% year to date – more than any other major trade – we would expect the index for US Imports to show the most severe decline. However, this has not been the case, with rates on the XSI® falling broadly in line with other major trades. Stausbøll said: “Carriers have prioritized removing capacity from this high-priority trade – often sacrificing profitability on other smaller trades…”
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Source: Xeneta
