With the demand for container shipping continuing to rise,
long-term contract rates are climbing to unprecedented highs according to new
data from ocean freight market intelligence firm Xeneta. They report that all
key shipping corridors registered steep increases since the beginning of the
year, driven by continuing surging demand, lack of equipment supply, and spot
rates that remain at peak levels.
According to the latest XSI Public Indices report from
Xeneta, rates soared by 9.6 percent month-on-month following January’s increase
of 5.9 percent. Saying that the current move has “been nothing short of
dramatic,” the new report highlights that the index is now at its highest ever
level. It was up 13.9 percent year-on-year, with a 16 percent climb during the
first two months of 2021.
“Shippers praying for a ‘time-out’ in this frenzied arena
may have to steel themselves for more of the same,” warns Xeneta CEO Patrik
Berglund. “It’s no overstatement to say this really is an extraordinary time
for the industry. The demand for available containers is well-reported, as is
congestion at ports (particularly in the US) and the disruption caused by
coronavirus. This continues to fan the flames of red-hot rates, giving the
carriers a huge advantage over shippers when it comes to negotiations.”
The strength of the market is demonstrated by the unusual
fact that every key trade corridor in February, in terms of both import and
export, recorded significant climbs on Xeneta’s index. In Europe, imports rose
by 9.6 percent (following last month’s 19.3 percent gain) with the index now up
21.1 percent year-on-year. The exports benchmark, meanwhile, saw its largest
ever monthly hike of 11.1 percent, driving a 7.7 percent increase against
February 2020 rates.
Developments in the Far East and the U.S. were equally
dramatic. Far East imports set new records with the index rising by 38.9
percent, the biggest single monthly increase seen on the indices. The index is
up 25.7 percent higher year-on-year and while export figure could not keep
pace, they still grew 8.1 percent, pushing the benchmark up 27.4 percent versus
last year. US imports rose by 7.1 percent (7.9 percent year-on-year), while
exports saw their greatest ever increase in the report, up 17.6 percent
month-on-month. However, they remain down 2 percent against February 2020.
“The operators have succeeded in maintaining all-time high
spot rates and this gives them ammunition for negotiating favorable long-term
contracts,” says Berglund. Shippers run the risk of playing the spot market and
hoping for lower rates or lock into contracts at a high price. He explains that
for smaller shippers there is a real danger of being sidelined for larger or
more profitable customers.
Berglund says the dynamic nature of the market makes
second-guessing future developments problematic, although he does see
inevitable “adjustments” ahead in an evolving segment. He points to the lines
rescheduling capacity from the congested Southern California port as one
opportunity to create efficiencies and create capacity which could impact
rates. In Europe, he also points to new services such as China United Lines and
efforts to provide capacity for smaller shippers.
“In the long-term fundamental change is possible,” Berglund
concludes, “but for the short-term shippers should be prepared for the
probability of further demanding negotiations and continuing high rates.”
Xeneta’s XPI index is developed from crowd source shipping
data capturing the latest rates from leading shippers with more than 160,000
port-to-port pairings.