Long-Term Shipping Rates Finally Peak, But Now Up 112% YoY: Xeneta

Despite another round of increases in long-term contractual ocean freight rates on key global trade corridors, month-over-month growth is slowing – and spot rates continue to weaken – suggesting that prices may have peaked.

However, according to the latest Xeneta Shipping Index (XSI®), which collects real-time data from major global shippers, valid LTAs today are 112% higher than the same time last year and a whopping 280% increase over to July 2019.

Changing fortunes?

Xeneta CEO Patrik Berglund commented: “Carriers have experienced staggering rate increases, driven by factors such as high demand, lack of equipment, congestion and COVID-related uncertainty, during 17 of the last 19 months.

“July saw even more bulls across the board, but the signs are clear that there is a ‘shift’ in sentiment as some fundamentals move.”

Explaining, he notes that July’s increases are the slowest since January, with upward pressure on long-term deals easing as spot rates fall on major transactions.

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Additionally, volumes on many corridors are down, with, for example, European containerized imports down 3% and exports down 6% in the first five months of 2022.

Cold Comfort

Berglund adds: “So there are indications that we may have peaked and that prices for new deals are more likely to hold up than to suddenly pick up, as we have become accustomed to seeing lately.

“However, that’s probably not much comfort to shippers who have been continually battered by an over-revving market and now see prices stabilizing at historically high levels.

“That said, nothing is certain. US and European ports are still congested, supply chain labor actions are spreading globally, and of course we still have the threat of COVID and its impact on economic activity, particularly in China.

“There are a lot of variables at play, so staying on top of the latest information when negotiating long-term contracts is imperative to gaining a competitive edge.”

Tough talks on the horizon

In another market snapshot, Xeneta also revealed that it surveyed attendees of its monthly customer webinar in July and found that many are now looking to renegotiate contract rates given recent market declines in the market. cash.

Berglund reveals: “Our customers, mainly large volume shippers, are now in a stronger negotiating position.

“Our survey showed that 44% no longer have confidence in the stability of long-term contracts – of these 44%, some 22% said they were more likely to allocate lower volumes only to less prices, while 22% preferred to shift the allocation to the spot market as soon as prices fall below long-term rates.

“It’s going to be an interesting few months ahead.”

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