The shipping liners (sea) are proposing improved terms on the long-term market as the spread amid spot charges and contact charges hits fresh highs on some trades.
Xeneta, in its Q3 Ocean Shipping Market report, stated that there is a spread between spot and long-term rates on many trades, citing the example of the US$2,900 per FEU spread between the markets on the Asia-US West Coast trade.
On the other hand, Xeneta’s XSI index reached a record high in August, mentioning that dropping spot rates are yet to be revealed in contract rate data, leaving container lines in a situation to cash in on contracts fixed in the last few months. However, as the number falls, the lines are increasingly cutting costs for new contrast and offering a good deal to the existing client who has not got all their volumes locked in.
The outlook for the container market was weak in the report, with huge spot rates falling during the pandemic’s early stages. For the Asia-US West Coast, rates fell instantly then they rose at the time of the pandemic. It took over 146 days to get from $5000 per FEU to $9000 while reducing it took 119 days to reach that mark. Xeneta expects inflation to linger to subdue demand as consumer confidence drops in an unprecedented economic situation.
The company expects inflation to continue to suppress demand as consumer confidence drops in an uncertain economic situation. The rest of the year seems questionable, whether it will reverse this pattern of dropping volumes, especially looking at the high demand at the end of 2021. It is said that in 2023, the demand growth is not likely to be high enough to counter the impact of high fleet growth which will leave the freight rate to slide.