Long-term contracted ocean freight rates are continuing their dizzying ascent, with a 4.1% climb in April leaving container shipping costs up 21.1% year-on-year, with a rise of 23.5% since December 2020. According to the latest market intelligence from Xeneta’s XSI® Public Indices report for the long-term contract market, prices escalated across all major global trade corridors in April, with no immediate relief for shippers in sight. On the contrary, the fallout from Ever Given’s Suez Canal blockage has added further pressure to supply chains already stretched by lack of capacity, equipment shortage, port congestion, and the continued ramifications of coronavirus.
Xeneta’s XSI® crowd sources the very latest long-term contracted rates from leading shippers and freight forwarders, utilizing over 280 million data points, with more than 160,000 port-to-port pairings, to deliver real-time rates insights every month. A short-term XSI®, mapping fluctuating short-term rates, launched to the market last week.
“It’s been another incredible month, in a unique year, for the container shipping segment,” comments Xeneta CEO Patrik Berglund. “In the US we continue to see severe delays and bottlenecks, with strong demand – driven in part by changing e-commerce habits – driving rate development. Some shippers are reportedly paying double the contracted rates they enjoyed just one year ago.
“Meanwhile, in Europe, the Suez Canal incident has created a backlog that has seen ports overwhelmed with cargo, while sailing schedules have suffered a ‘domino effect’ disruption. Here we can expect to see implications stretching well into May, and even June. Furthermore, shippers with cargoes on the affected ships have had initial delays to goods exacerbated by carriers dumping containers wherever they can in a rush to load available empty containers and get back on track. This means a rash of consignments are stranded in the wrong locations with no plans to rescue them. Seen as a whole the situation leaves carriers in a position of supreme strength, essentially able to pick and choose assignments and customers, and does not bode well for shippers desperate for much-needed rates relief.”
There was, Berglund points out, anything but relief in April. All trade corridors on the long-term XSI® showed indicators pointing relentlessly upwards. In Europe the imports benchmark continued towards the stratosphere, climbing by 5.4% month-on-month to end 43% up against April 2020, and a huge 47.7% up since the start of 2021. Exports increased by 2.3%, showing a more modest 7.3% year-on-year gain.
Far East imports edged up 0.2%, some 15.7% up against the same period last year, while exports showed more marked improvement - appreciating a further 5.3% month-on-month to stand 43.9% up against April 2020 (39.4% since the beginning of the year). Both US benchmarks also showed positive development, with imports climbing 3.5% (up 3.8% year-on-year) and exports rising 3.3%. However, this final figure is the market anomaly, remaining 5.7% down against April last year, even though this year has seen an overall climb of 5.6%.
In addition to this current snapshot, Xeneta also cautions that the short-term XSI® is now showing increases on trans-Atlantic trade lanes, suggesting further long-term rates pain for shippers may lie ahead.
“It’s undoubtedly excellent news for carriers,” adds Berglund, “and we continue to see the manifestation of that in company financials. For example, OOCL has revealed revenues of USD 3billion for the first quarter, a staggering 96% higher than this time last year, driven by both higher volumes (up 28.3%) and significantly higher revenues per container, up 58.3%. This comes on the back of last month’s sensational results from Maersk, CMA CGM, and Hapag-Lloyd, amongst others.
“It’s also worth noting pro-active strategies from some players to make the most of market opportunity. Here we can again reference Hapag-Lloyd, which has announced a EURO 550million investment in new containers – one of the industry’s largest ever orders. In an environment where equipment is in short supply, this is an ambitious move to shorten turnaround times, improve service and secure added market share.”
Berglund concludes that it is difficult to see any short- to medium-term decline in rates in a segment that is currently “in overdrive”.
“Negotiations are difficult,” he says, “so it’s important to keep abreast of the latest intelligence and maintain a limber strategy to make the most of opportunity, wherever it arises. That’s really the key to all stakeholders getting the maximum value for their business in such a competitive, dynamic and always exciting marketplace.”
Companies participating in Oslo-based Xeneta’s crowd-sourced ocean and air freight rate benchmarking and market analytics platform include names such as ABB, Electrolux, Continental, Unilever, Lenovo, Nestle, L’Oréal, Thyssenkrupp, Volvo Group and John Deere, amongst others.