Xeneta Says Long-Term Container Rates May Have Peaked

Oslo-based freight benchmarking and market intelligence platform Xeneta believes long-term container shipping rates may have finally peaked, although they are still 112% higher than this time last year and up a whopping 280% since July 2019.

The call comes as spot rates continue to weaken and month-to-month growth in Xeneta Shipping Index (XSI) is slowing, suggesting prices may have peaked, Xeneta said in a container rates alert.

“The carriers have enjoyed staggering rates rises, driven by factors such as strong demand, a lack of equipment, congestion and COVID uncertainty, for 17 of the last 19 months,” said Xeneta CEO Patrik Berglund. “July has seen yet more upticks across the board, but the signs are clear there is a ‘shift’ in sentiment as some fundamentals evolve.”

Berglund notes that July ‘s increases are the slowest since January, with upward pressure on long-term agreements easing as spot rates fall across many trade lanes. Volumes are also down.

“So, indications are there that we may have reached a peak and that prices of new agreements are more likely to hold than suddenly leap up again, as we’ve become accustomed to seeing of late,” he says. “However, that’s probably of little comfort to shippers that have been continually battered by a market in overdrive and now see prices stabilizing at historically high levels.

“That said, nothing is certain. US and European ports are still congested, industrial action on the logistics chain is spreading globally, and, of course, we still have the threat of COVID and its impact on economic activity, particularly in China. There’s a lot of variables at play, so it’s imperative to stay tuned to the latest intelligence when negotiating long-term contracts to achieve a competitive edge,” added Berglund.

With softening in the spot market and, in some cases, spot rates dipping below long-term contracted rates, Xeneta says some shippers may find themselves in a stronger position to renegotiate contracted rates.

“It’s going to be an interesting few months ahead,” Berglund added.

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