Shipping industry news, analysts say the current spot freight rate situation in the container shipping market is very favorable for shippers, providing an opportunity to push down freight rates in long-term contract negotiations with liner companies.
Prominent shipping analysts Lars Jensen and Xeneta’s chief analyst Peter Sand both emphasized that since June, spot freight rates in the container shipping market have continued to fall significantly, especially on the Asia to US routes. The decline in spot rates may affect the freight rates and contract durations of long-term contracts.
Image Source: Hapag-Lloyd
European liner companies like Maersk and Hapag-Lloyd are very keen on signing long-term contracts with major customers, and it is expected that the rates in annual agreements will decrease in the coming months.
Lars Jensen pointed out, “Both. A weak market will impact new contract prices.”
He stated, “When the market is weak, some contracts actually change, so the freight rates for the entire cargo or a portion of future cargo are lowered.”
The drop in spot freight rates is particularly evident on the Asia to US routes, mainly due to the US indiscriminately wielding the “tariff stick.” On the Asia-Europe routes, the market looks much better, with long-term contract prices about $300 higher than spot rates.
Image Source: Maersk
Peter Sand noted, “All things being equal, this is a good spread.”
He expects, “The Europe route market still has a considerable premium.” Shippers will base their expectations for annual long-term contracts on November’s freight rates.
He stated, “November will set the tone for the next 6 months.”
He does not rule out that geopolitical turmoil might temporarily put upward pressure on rates in the coming months, but in the long run, he believes the trend is downward.
Peter Sand pointed out, “Either spot rates rise, or long-term contract rates fall. We expect long-term contract rates to fall.”
Based on this, he expects that, given the current market situation, many shippers will initially choose to extend their annual contracts rather than renegotiate.
He stated, “We often discuss with clients that committing to 12 months in the current market might not be a good idea.”
He said, “Those with a cool head can see that freight rates are likely to fall.
