Oslo-based Xeneta reported its Xeneta Shipping Index (XSI) showed an increase of 5.9% for long-term contract freight rates in January
Describing it as “one of its highest ever” increases, Xeneta said this meant the index was up 4.5% year-on-year with “few signs of relief on the horizon”.
Spot rates have hit record levels in recent months driven by surges in demand, a shortage of equipment including containers in key export zones, congested ports, and lop-sided demand putting container shipping companies in a position of unparalleled strength during negotiations.
Xeneta chief executive Patrik Berglund said “The high spot rates seen on key trading lanes over the past few months have cascaded down into contracted agreements, putting the squeeze on shippers worldwide.”
“The reasons behind this are complex, but it’s driven by strong export traffic from China that far outstrips imports, leaving containers marooned in, for example, European ports when they’re desperately needed back in the Far East. Added to that, you have extreme congestion at some hubs – Maersk recently reported that between 30-35 ships were waiting to berth at Los Angeles/Long Beach – pushing up waiting times.”
“This serves to further reduce already strained capacity, exacerbating the imbalance in supply and demand. And then of course there’s the ongoing impact of Covid-19, with increased online sales married to disruptions in supply chains and, unfortunately, outbreaks among essential workers. Again, Los Angeles/Long Beach has been impacted here, only heightening the sense of turmoil.”
Xeneta’s round-up of regional imports and exports revealed that in Europe, imports surged by 19.3% – mostly driven by flows from Asia leaving the benchmark up 12.5% year-on-year. However, the supply/demand imbalance is evident on the export side, with a 1.9% fall, down 1.6% compared to January 2020.
The figures are reversed in the Far East where exports climbed by 15.1% while the import figure pegged at 4.6%, down 11.1% against this time last year.
Xeneta reports that the US import benchmark showed somewhat less volatility overall, with a rise of 0.7%, moving up 0.5% year-on-year while exports fell by their second-largest ever recorded dip, with the figure dropping 6.2%.
Of future developments, Mr Berglund said “It’s impossible to say with any confidence, but we can no doubt expect further change. We know that Beijing is keen to stabilise rates and protect exports. So, if we begin to see importers abandoning exports from Asia due to extortionate rates, then expect the authorities to step in. But what measures will they, or can they, take?”
“At the same time the demand opens the door to new entrants, as we can already see on the Far East-North Europe trade, with the arrival of China United Lines. Although this is a relatively small operator it still highlights a sense of opportunity. However, that’s not being felt by all, with Pacific International Lines advising its creditors to back its latest restructuring plan, or face watching the business slide into liquidation. So, not every liner is currently enjoying the high life.”
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