Analyst Xeneta believes the rates will continue to decline as demand slows
According to the latest data from Xeneta Shipping Index (XSI), rates fell by 1.1% in September, making it the first drop since January and one of only three declines in the past 21 months, which has been a golden period for ocean carriers.
While the decline is relatively marginal, analyst Xeneta expects the decline to pick up pace towards the end of the year with market fundamentals suggesting the days of ever-increasing rates for carriers may be drawing to a close.
In Europe, the import index fell 1.7%, while exports edged down 0.1%. However, the month-on-month picture has to be placed in context with the year-on-year long-term contract growth, which is up 123.7% for imports and 75.5% for exports against September 2021.
Xeneta reported drops in the Far East import and export benchmarks, with the former falling 1.2% and the latter 3% (this month’s largest decline). Last week, Drewry reported that a 40-ft equivalent unit from Shanghai to Los Angeles stood at US$3,779, marking the first time the rates fell below US$4,000 in two years.
The figures reflect falling volumes across the board, with cargoes into the region dropping 8.5% and those out sliding 1.4%.
The US export index is the exception, showing marginal growth of 0.3%. Imports fell by 0.7%, but should be seen in the context of a rates index sitting up 179.7% year-on-year.
“It had to happen sooner or later,” said Xeneta chief executive Patrik Berglund. “We’ve seen a steady, and at times spectacular, uptick of long-term contracted rates since the early days of the pandemic. This has fuelled record-breaking carrier profits, much to the dismay of a financially stressed shipper community. But over the past couple of months, clear signs of a market shift have emerged.”
Mr Berglund said spot rates have been dropping across the board over the last month as demand slows and port congestion eases. He now expects it will be shippers who hold the cards, as carriers will compete to lock in volumes as global demand lags.
He added, “The divide between the long- and short-term market is now wider than ever before on many trades, despite record numbers of blank sailings in what would normally be considered a peak season.
But this decline is relative to a market that has been in overdrive for a year. As Mr Berglund points out, XSI is currently 112% higher than it was in September 2021.
And while rates were expected to soften after the highs of the pandemic, Mr Berguland cautioned, “There is a very long way for rates to fall before we start talking about any major corrections in line with prepandemic levels.”
“Of course, it could be a case of ‘the bigger they are, the harder they fall’, but the carriers have proven very adept at managing the supply-demand balance in recent times, so nothing’s certain here.”
