Container rates alert

The data reveals that global contracted rates fell by only 0.6% this month, following on from September’s 1.1% decline (the first falls since January 2022), despite dramatic spot rate falls and easing port congestion freeing up capacity.

“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,” said Xeneta chief executive, Patrik Berglund.

“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. 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.”

A changing picture

But this situation may not continue, according to Mr Berglund. Xeneta’s data shows significant drops in long-term contracted rates on some major routes, such as a 30% decrease from September in rates from the Far East to the Mediterranean.

“Even on the routes where we’re seeing robust long-term rates, such as the US East Coast, there’s a question of whether anyone approaching next year’s tenders will agree to them when spot rates are so much lower,” continued Mr Berglund.

“What we may well see is shippers looking to transfer volumes to the spot market, spooking carriers desperate to tie-in business. Carriers could be forced to lower those coveted contracted rates.”

Overall, however, he remains optimistic. “Although the big picture points towards a market in decline,” he concludes, “it’s worth remembering just how much freight rates have soared since the start of the COVID pandemic.

“Shippers are, relatively speaking, still paying historically high long-term rates. The big question is, will they continue to do so?”