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End of Career High Quarters For Shipping Companies- Xeneta

13th December 2022
in News, Shipping & Port

Note* - All images used are for editorial and illustrative purposes only and may not originate from the original news provider or associated company.

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Global rates decreased by 5.7%, according to the most recent statistics from the Xeneta Shipping Index (XSI®), and import and export trends were negative throughout all key corridors. Although rates have fallen for three consecutive months, this is the biggest month-over-month drop since the XSI® launched in 2019.

A decrease in long-term rates is expected, but the magnitude of this shows the difficulties the business is currently facing, according to Patrik Berglund, CEO of Xeneta. Berglund claims that after more than two years of high demand, supply chain congestion, and undercapacity, carriers are now fighting for volume as a result of declining consumer spending in the face of the cost-of-living crisis.

Falls in Freight Rates, Volumes, and Demand Are Predicted by Xeneta

He says, they have already seen how spot rates have dropped since the summer, and after a few months of relatively slim long-term rate declines, they are now experiencing a catch-up as old contracts expire and new ones go into effect.

In his opinion, this month’s XSI® gives a clear picture of the underlying market move. The record-breaking quarters that the top carriers have been putting forth are now coming to an end, as average rates are dropping. Stormy waters are in store for a sector that is sometimes a bellwether for the health of the global economy as 2023 draws closer.

Xeneta’s real-time data, which is crowdsourced from the biggest international shippers, is replete with alarming signs, but Berglund is quick to emphasize that the market is declining from a high.

Despite the fact that this is the first month since October 2021 in which the index is less than 100% up year-over-year, he notes that global rates are still 67.2% higher than they were in November 2021. He adds, that just shows how strong and how long the carriers’ position has been, and how long. But it appears that this will stop soon.

The XSI® exhibits declines across all significant trading routes on a regional basis. Despite declining 3.5% for the third consecutive month, European imports were still 47.9% higher than they were a year earlier.

Volumes fell 5% in the first nine months of 2022, reaching their lowest level of the year in September. The XSI® showed slightly better results for exports, which decreased 1.1% for the month (up 83% from November 2021) thanks to the continued strength of trade between Europe and the US East Coast.

Exports from the Far East on the XSI® fell by 8.5%, which was their biggest-ever decline (up 68.5% annually). Similar circumstances applied to the import benchmark, which fell by 6.2%. This index has now had the worst year-over-year performance, with only a 30.9% increase since November 2021. In the US, import and export benchmarks both experienced significant drops. The import index experienced a large 8.9% fall because of low volumes on the Transpacific corridor and interim rates that are reportedly below break-even on several services.

With a 5.3% decline, the export performance was slightly better, leaving rates higher than November 2021 by 38.6%.

According to Berglund, it’s challenging to see how the reductions will be slowed in the short- to mid-term. Due to China’s ongoing zero-COVID policy, a large portion of the country is currently under some sort of lockdown, while in the US and Europe, the anticipated peak season for cargoes hasn’t materialised due to unsettling macroeconomic data.

On the plus side, both in the US and Europe, congestion-related backlogs have decreased. However, due to shippers increasingly storing items they don’t now need due to weaker demand, many European terminals are still overflowing with cargo.

As they move into the new year, Xeneta is now projecting further rate declines, which, according to the company’s experts, may result in volumes falling by 2.5% or more. The Oslo-based team predicts that lay-ups will rise along with the planned expansion of the global container fleet, with the idle fleet expected to surpass 1 million TEU.

After such a lengthy, strong period of rate increases, it’s apparent that 2023 will usher in even worse times for the global carrier community, writes Berglund in his conclusion. Time will tell how difficult that turns out to be.

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