Ocean shippers face a ‘brutal’ 2024

In October Xeneta reported that the market was once again in decline, dashing short-lived hopes of a revival. The latest figures from the Xeneta Shipping Index of contracted rates confirm this with a drop of 4.7% in October, with the index now standing 62.3% lower than in November 2022.

Emily Stausbøll, Xeneta market analyst, believes this latest development is an ominous sign for carriers.

“The XSI is an average of all long-term contracts on the market,” she said, “so in essence the global index is currently being propped up by those older contracts which were signed back in 2022 when rates were much higher.

“These older contracts with higher rates should have afforded some financial insulation throughout 2023, however we have still seen four of the major carriers post big financial losses in Q3.”

Stausbøll believes the situation will get even worse as we enter 2024. “Those older contracts will largely be replaced in the early part of next year and carriers will be left exposed to the current weak market,” she said.

“We can be absolutely certain the new contracts will be signed at much lower rates than those signed at this time last year, so if carriers are already reporting losses, what are they going to be next year? We could be talking about extremely big numbers.”

Long-term rates are up

While the XSI is down from the same period in 2022, long term rates remain up by 39.5% compared to November 2020.

“Long terms rates are solid compared to pre-pandemic, but this still hasn’t been enough for some of the biggest ocean liner shipping companies to deliver a positive operating margin in Q3 this year,” said Stausbøll.

“The only way carriers can hope to avoid catastrophic financial losses in 2024 will be through capacity management, but it will be extremely tough to achieve.”