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Contract rates decline for second straight month in October
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In contrast, spot rate slide is slowing after months of contraction
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Drewry expects smaller week-on-week spot rate cuts in the next few weeks
October contract rates fell slightly month on month, their second straight month of decline, as weak demand and overcapacity worries have now caught up with container ocean shipping long-term prices.
Xeneta’s global XSI® fell 0.6% month on month in October, but the index’s 445.7 points reading is still above July despite spot rates falling on significant trades in the same timeframe.
Meanwhile, spot rate declines are slowing after several months of steady slide, according to Drewry’s composite World Container Index. A similar slowing in spot rates was registered by Freightos Baltic Index last week.
“Eyebrows will be raised among industry observers this month,” noted Xeneta chief executive Patrik Berglund, co-founder of the ocean and air freight rate benchmarking platform.
“Spot rates have plummeted since the summer across key trading corridors, such as the Far East to US West Coast, and long-term rates usually play catch-up after a few months. In addition, you have zero sign of peak volumes hitting the waves, as many shippers already have high inventories and are anticipating lower seasonal demand due to the challenging macroeconomic picture,” Berglund said.
“Added to weaker consumer confidence, you also have higher fleet capacity. So, in this context, a mere 0.6% fall looks almost like a ‘win’ for the carriers.”
Xeneta’s US import XSI® stands out from global and European import indexes as it registered a 5.2% rise in October to 590.9 points, setting a record high.
“This is in contrast to huge falls in the spot market, which is closing in on pre-pandemic levels – especially on the transpacific trades,” said analyst Katherine Barrios.
Barrios said the XSI® for exports out of the Far East fell to 613.7 points in October, down 2.2% from September and down, though still up by 89.4% since the start of the year.
With the major trades out of the Far East pulling in different directions, this 2.2% fall is driven by exports to Europe and other regions, excluding the US, she said.
Drewry’s composite World Container Index eased 7% to $3,145.11 per 40-foot container (FEU) last week, the 35th consecutive weekly drop, and has plunged 67% from the same week last year.
The index is now 70% below the peak of $10,377 reached in September 2021 and is 16% lower than the 5-year average of $3,747, indicating a return to more normal prices, but still 121% higher than average 2019 pre-pandemic rates of $1,420.
The average composite index year-to-date is $7,209/FEU, $3,462 higher than the five-year average. Freight rates on Shanghai-Rotterdam fell 13% or $591 to $3,845/FEU. Spot rates on Shanghai-Genoa fell 9% or $414 to $4,200/FEU.
Shanghai-New York and Shanghai-Los Angeles dipped 3% each to $6,034 and $2,412/FEU. However, rates on New York-Rotterdam gained 1% to $1,319. Los Angeles-Shanghai, Rotterdam-Shanghai and Rotterdam-New York hovered around the previous week’s level. Drewry expects smaller week-on-week rate cuts in the next few weeks.
Freightos Baltic Index’s Asia-US West Coast prices (FBX01 Daily) were stable at $2,494/FEU, down 85% year on year. Asia-US East Coast prices (FBX03 Daily) were steady at $5,713/FEU, and are 71% lower than rates for this week last year.
Judah Levine, head of research at Freightos, said the transpacific ocean rate slide slowed last week as prices to each coast stayed level.
“Carriers have increased the number of canceled transpacific sailings for the coming weeks as demand decreases. The slowdown in rate decreases could be an early sign that the so-far ineffective reduction in capacity is starting to have an impact,” Levine said.
He said carriers are increasing blanked sailings from Asia to Europe as well, though rates fell an additional 8% on this lane last week nonetheless as volumes continued to decline.
Another sign of falling demand for ocean freight is the recent increase in size of the inactive container ship fleet, which measures the number of idled vessels – excluding blanked sailings.
Hapag-Lloyd’s CEO Loyd Habben Janssen speculated last week market forces could push ocean rates below 2019 levels in the near term. He believes demand trends and higher per-unit costs than in 2019 will ultimately drive rates above pre-COVID levels.
