The beleaguered carrier industry took another major hit in June, with the latest data from Xeneta’s Shipping Index (XSI®) showing a decline of 9.4% in global long-term shipping rates. Following on the heels of a 27.5% collapse in May, and a 10.3% fall in April, contracted rates have now shed 47.2% of their value in the last three months alone, and 51.7% over the course of 2023.

Xeneta’s real-time data, crowd-sourced from leading global shippers, shows falls in the prices of valid long-term contracts across all key trading corridors. The uniform declines have now pushed the XSI® to a 23-month low, with, as Xeneta CEO Patrik Berglund points out, little hope of a turnaround on the industry horizon.

Challenging times

He notes: “The fall from the peaks of last year have almost been as dramatic as the rates explosion which gave carriers such a profitable 2022. Those higher rates now appear to be a distant memory, while 2023 is becoming quite challenging. A fall of almost 50% in contracted prices in just three months on the XSI® is highly unusual.

“Furthermore, with on-going weak demand, continuing macroeconomic and geopolitical uncertainty, and a growing excess of capacity, it’s difficult to see how the industry can turn this current trend around – at least in the short-term.”

Xeneta’s data demonstrates a case of ‘the bigger they are, the harder they fall’, with huge declines for the year to date on the main container corridors. The Far East export benchmark, a key link in the global supply chain, has, Berglund remarks, steeply declined since December 2022, shedding 65.3% of its value. Meanwhile, the US import sub-index is down 56.3% for the year, with the European import benchmark declining 46.2%. The opposing European export figure fared only slightly better, down 38.3%.

Dramatic drops

“If we sift through those headline figures and look at individual trades, we see some eye-catching reversals in fortune over the first six months of the year,” Berglund notes. “For example, China to North Europe and Indian West Coast & Pakistan to North Europe are two trades that have racked up total declines of more than 70% since the end of last year. Taiwan to the Mediterranean and Taiwan to North Europe have also plummeted from the heights of 2022, with falls of 65.5% for 2023 to date.

“There really are very few bright spots with the only exception this month being the trade lane from South America East Coast to China, which is up by 11% month-on-month. Hardly enough to lift the hopes of anyone within the carrier community. ”

Sub-index slump

Xeneta’s in-depth analysis shows a decline in all import and export benchmark figures for all regions. In Europe, the import sub-index hit a 24-month low point, falling 9.4% since May, while the export figure dropped for the third consecutive month, declining 5.1%. The XSI® for Far East exports lost 13.9% of its value in June and has now slumped by 69.5% since its peak last year. The back-haul regional import trade has experienced a more muted decline, with a fall of 6.7% in June and 35.4% for the year to date.

The story continues on the US sub-indexes, with an 11% drop on the import benchmark pushing it to an 18-month low. The export back-haul figure recorded a 4.3% fall.

The big picture

“One is left wondering where this will all end,” Berglund concludes. “If we look at volumes, there are some figures that suggest things might not be as bad as they first appear – with US container exports actually increasing for the for the first four months of the year, by 1.8% year-on-year, while inbound container demand for Europe ‘only’ declined by 1.1% for the same period. But again, those figures have to be seen against a wider backdrop of declining global demand, easing port congestion and increased capacity – all factors that exert downward pressure on rates.

“It’s perhaps more telling to consider the recent development of the key Far East XSI® export index. Here we see single-digit month-on-month declines from February to April, accelerating to double-digit drops for the last two months. This is a clear indication of weakening demand from essential Western markets and a worrying omen for the major players in this fast-paced, always evolving shipping segment.”