Drewry warns of continued instability in contract rates

“Transpac spot rates have declined by 80 to 84% in the year to the end of May 2023, as everybody knows. This was a correction from the recent super-inflationary trends seen during the Covid period – not a real rate collapse,” said Philip Damas, managing director, head of supply chain advisors.

Rate insight

He said that the Drewry World Container Index reveals that when compared with December 2019, the latest transpacific spot rates are broadly the same, so you could say that spot rates on this route have fully normalised.

However, the comparison does not take into account the inflation which many economies have experienced between 2019 and now. If you take that into account, then spot rates are actually lower than in 2019.

The transatlantic route is different. It does not follow the spot rate trends of the transpacific and Asia-Europe routes.

On this route, spot rates have not normalised, they are still 62% higher than in pre-pandemic and remain elevated. Yes, they have dropped by 47% in the year to May 2023, but Drewry forecasts that transatlantic westbound rates have further to fall.

The situation is different again on the Asia-Europe and the South America routes.

Based on the Drewry East-West Contract Rate Index, average valid contract rates in May 2023 were 50% lower than in May 2022.

But contract rates paid today by shippers are still about 80% higher than in December 2019.

”In other words, contract rates have not normalised overall on the East-West routes. The normalisation of East-West contract rates is lagging that of East-West spot rates,” said Mr Damas.

He said that Drewry expects contract rates to decline again in 2024.

“There’s no stability of rates there, in our view,” he said.