Despite another slew of rises in long-term contracted ocean freight rates across key global trade corridors, month-on-month growth is slowing – and spot rates continue to weaken – suggesting prices may have peaked. However, according to the latest Xeneta Shipping Index (XSI®), which crowd-sources real-time data from the world’s leading shippers, today’s valid long-term agreements stand 112% higher than this time last year, and a massive 280% up against July 2019.

Shifting fortunes?

“The carriers have enjoyed staggering rates rises, driven by factors such as strong demand, a lack of equipment, congestion and COVID uncertainty, for 17 of the last 19 months,” comments Xeneta CEO Patrik Berglund. “July has seen yet more upticks across the board, but the signs are clear there is a ‘shift’ in sentiment as some fundamentals evolve.”

Explaining, he notes that July’s increases are the slowest since January, with upward pressure on long-term agreements easing as spot rates fall across major trades. In addition, volumes on many corridors are down, with, for example, containerized European imports falling by 3%, and exports 6%, in the first five months of 2022.

Cold comfort

“So, indications are there that we may have reached a peak and that prices of new agreements are more likely to hold than suddenly leap up again, as we’ve become accustomed to seeing of late,” he says. “However, that’s probably of little comfort to shippers that have been continually battered by a market in overdrive and now see prices stabilizing at historically high levels.

“That said, nothing is certain. US and European ports are still congested, industrial action on the logistics chain is spreading globally and, of course, we still have the threat of COVID and its impact on economic activity, particularly in China. There’s a lot of variables at play, so it’s imperative to stay tuned to the latest intelligence when negotiating long-term contracts to achieve a competitive edge.”

Tough talks on the horizon

In a further market insight, Xeneta also disclosed that it ran a survey of its customer base in July and found that many were now looking to renegotiate contracted rates given the recent spot market drops.

Berglund reveals: “Our customers, mainly large volume shippers, now find themselves in a stronger negotiating position. Our survey showed that 44% no longer feel confident in the stability of long-term contracts – of that 44%, some 22% said they were more likely to allocate lower volumes only to cheaper contracts, while 22% preferred to move allocation to the spot market as soon as prices dip below long-term rates. It’s going to be an interesting few months ahead.”

Regional insights

On a regional basis, July’s XSI® shows a rise in the global index of 435.2 points and gains, albeit relatively small ones, across all major corridors.

European imports continued to grow, but at a much slower rate than recent months, rising by 1.9% in July (a 62% year-on-year increase). Exports climbed more strongly, by 3.9%, having now soared 92% this year. Far East exports have enjoyed a bumper 12 months, now standing 150% up year-on-year, with another 2% rise this month (again, a slower rate of increase). Imports edged up 1.1% and now stand 53% higher than July 2021.

The US benchmarks on the XSI® showed the strongest performances, with the import figure gaining 5.9% (up a huge 173% year-on-year), while exports also climbed 5%. This latter benchmark is the only one to have enjoyed greater growth in July than June. However, Berglund points out that export volumes have declined considerably compared to pre-pandemic levels, with the ratio of loaded imports to loaded exports to the US rising from 1.9 in 2019 to 2.5 in the first five months of 2022.

Xeneta’s XSI® is compiled from the latest crowd-sourced ocean freight rate data aggregated worldwide. Companies participating in the benchmarking and market analytics platform include names such as ABB, Electrolux, Continental, Unilever, Nestle, L’Oréal, Thyssenkrupp, Volvo Group and John Deere, amongst others.

To get the full XSI® Public Indices report for the long-term market, please visit: https://www.xeneta.com/xsi-public-indices

To see daily XSI®-C short-term market rate movements for 8 main trade lanes, please visit https://xsi.xeneta.com.