Long-term box freight rates are still rising, but they are now beginning to feel some pressure. Long-term rates rose 4.1% in August, according to data from the online platform Xeneta, and are now 121.2% higher than they were at the same time last year.
The world’s top carriers are still on track for another record-breaking year of profits despite lower spot prices, inconsistent demand, and ongoing supply chain difficulties, according to a report released today by Oslo-based Xeneta. On important trade corridors, there are indications that new long-term contracted rates are beginning to decline.
The average paid by all shippers is still increasing, though, as they replace expired agreements with ones that have far lower rates. According to some liner analysts, total liner revenues this year may surpass $200 billion, a record that would place container shipping among the world’s most lucrative sectors. With spot markets in decline, long-term rates were certain to follow. However, several liner CEOs have recently suggested that the market is about to normalize in the upcoming months. Rodolphe Saadé, head of CMA CGM, stated to Bloomberg last Friday that “a drop in freight costs in practically all sectors has been occurring for many weeks already. That decline is anticipated to persist. I anticipate a gentle landing rather than a violent descent.
Many of his peers have subsequently mirrored his remarks. According to Drewry’s World Container Index’s most recent spot rate data, pricing falls from Shanghai to Los Angeles and Shanghai to Rotterdam are intensifying. The fare from Shanghai to Los Angeles decreased by 6% last week and by 10% in only two weeks. Before then, it had taken five weeks to reduce the rate by 10%. Rates from Shanghai to Rotterdam decreased 5% last week and by a total of 9% over the previous two weeks.
It had previously taken eight weeks for the rate to decrease by 10%. The Shanghai Containerized Freight Index (SCFI) had one of its greatest weekly declines ever last week, dropping 275 points. According to Sea-Intelligence, schedule dependability has steadily increased since January 2022, gradually releasing more capacity into the market. It also noted that spot rates have continued to decline, supporting the idea that the market is no longer experiencing an acute supply shortage. Additionally, and for several months now, the end-to-end transit time data from Flexport indicate considerable improvements, particularly in the US. However, not everyone is persuaded by this theory. In a recent market report, the online platform Project 44 predicted that shipping lines will continue to utilize blanking as a technique to maintain high freight rates since it is doubtful that prices would continue to decline and that a floor will be reached soon. Liner shipping now has a better negotiating position, according to Parash Jain, global head of shipping and ports research at HSBC.
