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Long-term ocean freight rates fell sharply month-on-month in November as subdued spot prices, weak demand and ongoing economic uncertainty caught up with container contract agreements.
The latest data from the Xeneta Shipping Index (XSI) shows that global freight rates have fallen by 5.7%, with adverse import and export trends across all major corridors. It was the third straight month of declines in rates, but the largest month-on-month drop since the XSI was introduced in 2019.
Xeneta is now predicting a further drop in rates for the new year, and according to the company’s analysts, sales could fall by 2.5% or more in the new year. With the expected growth in the size of the world’s container fleet, the Oslo-based team also sees an increase in the idle fleet, which is expected to exceed 1 million TEU.
fight for volume
“The fall in long-term interest rates was not a surprise, but its scale is indicative of the challenges the industry is currently facing,” said Xeneta chief executive Patrik Berglund.
Berglund said that after more than two years of strong demand, supply chain congestion and lack of capacity, sluggish consumer demand in the face of a cost of living crisis has left carriers in a “battle for volume”.
“We’ve seen how spot rates have plummeted since the summer,” he commented, “and, after several months of very weak long-term rate declines, as existing agreements expire and new contracts come into effect. “
storm ahead
“I think this month’s XSI is an unmistakable indication of a shift in market fundamentals. Average rates are now falling, marking the end of the record-breaking quarters we’ve almost become accustomed to seeing from the leading operators. As 2023 looms, stormy waters await for a segment that is often a bellwether for global economic well-being.”
Despite the abundance of negative indicators in Xeneta’s real-time data from the world’s leading shippers, Berglund was quick to point out that the market was coming off its highs. Compared with November 2021, global rates are still up 67.2%, he said, although this is the first month since October 2021 that the index has risen less than 100% year-on-year.
“It’s just a testament to how strong the carrier’s position is,” he noted, “and how long it lasted. But, it appears, this is going to end.”
down, down and down
On a regional basis, the XSI showed declines across all major trade routes. European imports fell for the third straight month, down 3.5%, but were still up 47.9% year-on-year. The first nine months of 2022 fell 5%, with exports in September falling to the lowest level of the year. Exports from XSI fared slightly better, down slightly to 1.1% growth for the month (up 83% from November 2021), helped by continued strength in Europe’s trade to the US East Coast.
XSI’s Far East exports experienced their largest ever decline, down 8.5% (up 68.5% year-on-year). The story was similar for the import benchmark, which fell 6.2%. On a year-over-year basis, it is currently the worst performing index, up “only” 30.9% since November 2021.
In the U.S., both export and import benchmarks fell sharply. The import index fell sharply by 8.9% due to lower volumes in the trans-Pacific corridor and spot rates said to be “below breakeven” on some services. Exports fared slightly better, falling 5.3 percent and rising 38.6 percent compared to November 2021.
Unhappy Chinese New Year?
“It is difficult to see how the decline will be stemmed in the short to medium term,” Berglund commented. “China’s ongoing zero-COVID policy means that much of the country is now in some form of lockdown, while in the US and Europe, expected freight The peak season has not started and macroeconomic indicators are worrying.
“On the bright side, backlogs caused by congestion in the U.S. and Europe have eased. However, many European ports Still stacked with cargo.”
Berglund concluded: “After such a long and strong run of freight rate growth, it is clear that 2023 is going to be tougher times for the global carrier community. Time will tell exactly how challenging this proves to be.”
— trade arab news agency
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