(Commonwealth_ As spot rates in the shipping industry inch upwards, analysts are advising shippers to remain calm amid the November general rate increases (GRIs) and not overreact to short-term changes. The recent Drewry World Container Index (WCI) composite index showed a 4% week-on-week increase, primarily driven by rising rates on routes from Asia to North Europe and the Mediterranean, which saw spikes of 8% and 11%, respectively. This translates to rate hikes of around $264 and $352 per forty-foot equivalent unit (FEU) on these lanes, but experts caution against interpreting this as a significant trend reversal.
Drewry analyst Simon Heaney tempered expectations, clarifying that this uptick was a minor recovery after a prolonged decline in spot rates, which had dropped by about 50% over the previous 14 weeks. Heaney emphasized that this increase represents “just one week” and does not signify a significant market rebound. James Hookham, director at the Global Shippers’ Forum, echoed this perspective, stressing that “we shouldn’t read too much into one week’s figures” and suggesting that it would have minimal impact on ongoing contract negotiations.
Xeneta’s chief analyst, Peter Sand, also advised shippers to remain steady during contract negotiations, as the overall trend in the container shipping market remains downward. According to Sand, “European shippers could be spooked by the spot rate hike in early November, but they should not be.” He argued that while carriers may be eager to keep the spot market elevated, the underlying direction of rates is still downward due to market forces. He noted that carriers are attributing volatility to disruptions, such as the ongoing conflict in the Red Sea, but anticipates that the November rate hike will be short-lived.
For European importers currently engaged in contract discussions, it’s essential to consider the broader market perspective. Drewry’s data shows that average spot rates from Asia to North Europe and the Mediterranean are currently at $3,396 and $3,648 per FEU, respectively, a moderate increase from previous levels. However, these rates are still significantly below their peak in July, with them having dropped roughly 50% since then. Xeneta’s data aligns with this trend, showing declines of 55% and 49% in the Asia to North Europe and Mediterranean trades since the end of August, suggesting a sustained downward trend.
Additionally, Xeneta’s latest data on contract rates shows a 5.6% decline in its October index, with a 7.5% decrease in Asian export rates this month alone. This narrowing gap between spot and contract rates, now at $389, indicates that while the short-term market is softening, the long-term contract market has not followed suit to the same extent. Sand emphasized that this is advantageous for shippers, as the spot market is falling rather than the contract market rising. Nonetheless, Heaney anticipates that contract rates for the coming year may still be higher than last year, albeit marginally.
Seasonal factors and blanked sailings, which have temporarily tightened supply, are primarily responsible for the recent, minor spike in Asia-to-Europe rates. Heaney noted, “Anecdotally, we’re hearing that the lines are well booked for the next few weeks.” However, this demand surge is unlikely to sustain rates for an extended period, as broader economic conditions and shipping capacity are not in favor of lasting rate increases. A significant factor underlying the carriers’ urgency to bolster spot rates is the oversupply in the shipping fleet. Data from shipbroker Braemar highlights an imbalance, with vessel orders continuing to outpace demand. According to Braemar, fleet growth has surged 8% this year, reaching 29.81 million TEU, up from 26.97 million TEU a year ago.
