Spot rate decline continues, long-term rates resilient: Xeneta

The container shipping market continues to show weakness, especially on the spot market, as falling demand and easing congestion have improved shippers' position, says Xeneta in its Q3 2022 Ocean Shipping Deep Dive Market Report.

"Spot rates on the major global trades have fallen to levels not seen since the spring/summer of 2021 and have continued to fall in August and September, despite this traditionally being the height of the peak season."

Spot rates from the Far East to the U.S. West Coast have fallen to their lowest level since 2020, averaging less than $3,500 per FEU and close to a third of what they were at the start of the year. The market low on this trade is down to less than $1,900 per FEU. "The drop in spot rates on the trans pacific has happened much faster than the increase. It took 146 days to get from $5,000 per FEU to $9,000, whereas it took only 119 days for the $5, 000 per FEU mark to be breached on the way down."

Long-term rates have been more resilient with the spread between short and long-term rates reaching new highs on many trades, says the report. For example, shippers on the long-term market are paying $2,900 per FEU more than prevailing spot market rates between the Far East and the U.S. West Coast.

"As the global XSI suggests, reaching another record high in August, the average rate for all valid long-term contracts has yet to decline, allowing carriers more exposed to the long-term market to benefit while global shippers pay up. However, as volumes fall, carriers are increasingly cutting rates for new contracts and offering better deals to existing customers who haven't got all their volumes locked in."

Deliveries of new ships are expected to far outpace growth in demand next year, says Xeneta in its report, indicating a continued fall in freight rates "though whether or not these will fall to pre-pandemic levels will depend on the extent of the economic pain and carriers' strategies in capacity management."

So far this year, global container volumes are down 1.4 percent "but with different trajectories across regions. The world's largest trade - intra-Asia - has seen 2.9 percent growth in the first seven months of the year while exports out of the region are down by 1.4 percent."

Coming to supply, no container ship was sent for demolition in September. "The last container ship that was demolished was a 30-year-old 310 TEU ship back in December 2021.

"On September 30, the 6- to 12-month charter rate for a 6,800 TEU ship was $62,000 per day, almost $80,000 a day lower than it had been a month earlier but still almost $40,000 per day higher than in September 2020."