The latest ocean freight rates data from Oslo-based Xeneta shows that backhaul spot rates are now firmly following the fronthaul trend, with significant drops on key trades. This is exemplified by the North Europe to Far East container corridor, where rates are now 6.8% below the pre-pandemic figures of January 2020.

Protracted decline

“The fronthaul developments have captured most of the press, with spot rates falling away dramatically since the summertime,” comments Peter Sand, Xeneta’s Chief Analyst. “However, in some cases, backhaul rates have seen equally large drops and, what’s more, those drops have been more protracted.”

Here Sand points to the North Europe – Far East route again, where the negative development has been “locked in” since May 2021. The average rate for a standard FEU has now fallen to USD 820, a fall of more than USD 1 000 per FEU (down 56%) over the last year and a half.

Mixed fortunes

“This is now one of the first trades back at pre-COVID levels,” he notes, “but we don’t expect it to be the last. That said, other trades are currently showing greater resilience, and some are strongly outperforming their fronthaul counterparts. The US West Coast to Far East is one such example.”

Sand says Xeneta’s crowd-sourced, real-time data shows that prices on this trade are now down to USD 1 100 per FEU, but adds that the decline has been slower and less pronounced than the fronthaul collapse:

“The fronthaul saw the fastest and deepest fall in spot rates on any major corridor, yet the backhaul, despite the decline, remains up by almost 50% against January 2020.”

Tables have turned

He continues: “A lack of equipment and capacity saw US exporters losing out when the market was at its peak, with many carriers simply refusing to carry their goods, instead opting to rush containers back across the Pacific for the higher spot rates. Well, the tables have now turned and carriers are desperate for volumes in a softening market. This leads shippers to a happier situation of predictably securing volumes at better value prices.”

Of the other main trades, Xeneta’s data shows the backhaul spot rates on the increasingly popular US East Coast to North Europe route have fallen faster than on the fronthaul. They are now down from their August peak, currently sitting at USD 750. Market demand here has propped up fronthaul rates, but, with added capacity and weakening fundamentals, these are now beginning to follow the wider, negative spot rate trend.

Standing (relatively) strong

“This reefer spot rate market is clearly not in the same straits as its dry sibling,” comments Emily Stausbøll, Market Analyst, Xeneta. “Although impacted by the same wider macroeconomic and geopolitical factors, demand remains strong enough to ensure that, at least for now, rates seem well positioned to weather the current storm.

“In fact, there’s only one route where reefer rates have fallen by a greater percentage than dry boxes, and that’s North Europe to the US East Coast, where record high volumes and congestion issues have limited standard spot rate declines. Aside from this anomaly, three-month reefer dips are vastly overshadowed by the significant negative developments experienced in the dry market.”

Premium power

The key North Europe to Far East trade proves this point. Here, the average spot rate for a 40’ reefer container has fallen by 4.4% since mid-July, currently sitting at USD 5 230 (18 October). However, the freight rate for dry containers has fallen by some 10.2% in the same period, down to USD 880 per FEU. This means the reefer premium has stretched from USD 3 670 per box to USD 4350.

The largest increase in premiums since mid-July has been witnessed on the trade to Australia and New Zealand, where the gap between the two FEUs has now doubled. A divide that stood at USD 2 050 is now USD 5 450; with reefers currently commanding USD 12 900 per 40’ reefer on the spot market, compared to USD 7 470 per standard FEU. Cold container rates remain a healthy 19% up year-on-year to Oceania, while dry rates have dropped by 15.3% since this time last year.

Intelligence matters

However, as Stausbøll notes, the North Europe to US East Coast trade is an exception, with reefer rates sinking by 20.6% over the last three months, compared to an 8.7% fall for standard FEUs. A different anomaly is delivered on the North Europe to South American East Coast corridor, which is the only sailing where reefer spot rates are cheaper than dry ones. Here, traditionally a backhaul for reefers (with less exports than imports), cold containers currently command USD 3 300 compared to USD 3 500 for a dry FEU.

Despite this disparity, dry spot rates have fallen far faster than reefer rates over the past three months here, slumping by 15% compared to ‘just’ 2.5% for reefers.

“Expect some animated negotiations over spot rates going forwards, for both reefer and dry cargoes,” Stausbøll concludes. “We’ve seen how quickly things can change over recent months, so everybody needs to be on their toes, armed with the very latest data, to get the optimal business value in a very tough, dynamic marketplace.”

To sign up to Xeneta’s weekly container rates blog please visit www.xeneta.com/blog

According to the latest market intelligence from Xeneta, which crowd sources real-time ocean freight rate data from leading shippers, the average 40’ HC reefer spot rate stood at a mighty USD 5 230 for the trade on 23 August, compared to dry standard FEUs at USD 980. At this point two years ago, September 2020, the reefer spot rate was USD 4 000.

Converging curves

“This is interesting for a number of reasons,” comments Peter Sand, Chief Analyst, Xeneta. “One is the steady increase, albeit with a dip in August, in the reefer spot rates, but also the fact that the spot rates are still above the long-term contracted agreements is noteworthy. That said, the long-term rates have also been increasing steadily (currently USD 4 850) and the spread between the two is diminishing.

“In fact, that divide is now at its narrowest since November 2019, so we’ll be looking out to see if, as on some other trades, the spot rates fall below the contracted ones. When we consider the recent development curve that wouldn’t be too surprising, as long-term rates have now climbed by an impressive 14.5% since the start of the year.”

To dry for?

As far as dry spot FEU rates on the North Europe to the Far East route are concerned, Sand highlights that they have been slipping away since June 2021, when they were close to USD 2 000.

“It’s been one-way traffic,” he notes. “The difference between reefers and standard 40’ containers has now opened up to USD 4 250 (23 August). From a broader perspective, that means the average spread between the two this year is approximately 2.5 times higher than it was in 2019. That’s a very significant gap.”

Sand adds that there’s also a divide between dry standard spot rates on this route compared to the Mediterranean to Far East corridor. Here 40’ containers command a price of USD 1 800, a USD 810 premium.

Shifting volumes

“That shows the value of accessing the latest data,” he concludes. “It’s a tough market at present, so knowing where, and what kind of container, offers the best value can make all the difference to those with the most flexible logistics chains.”

In the first six months of the year, 30.2% of reefer volumes exported from North Europe went to the Far East (Source: CTS). Reefer volumes on this trade have grown by 1.5% for the year to date in June, whereas the total reefer exports from North Europe have dropped by 1.3% for the same period.

Oslo-based Xeneta’s unique software platform compiles the latest ocean and air freight rate data aggregated worldwide to deliver powerful market insights. Participating companies include ABB, Electrolux, Continental, Unilever, Nestle, L’Oréal, Thyssenkrupp, Volvo Group and John Deere, amongst others.

To sign up to Xeneta’s weekly container rates blog please visit www.xeneta.com/blog

Declining spot rates on the Far East to US West Coast and East Coast ocean freight trades have converged with historically strong long-term rates, presenting business opportunities for both carriers and shippers.

According to the latest market intelligence from Oslo-based Xeneta, spot rates to the East Coast have now fallen by more than USD 3 400 per FEU (-26.9%) this year, while those from the Far East to West Coast have slumped by USD 3 200 (-33.1%). Long-term rates, on the other hand, have sky-rocketed. 2022 has seen long-term contracted prices soar by 103.5% for East Coast trades and 96.9% for the West Coast.

It’s a development that offers “new strategic openings” for ocean carriers and their customers, according to Peter Sand, Chief Analyst, Xeneta.

Flexibility pays

“We’re noticing a similar pattern across a number of key global trade corridors,” he notes. “The spread between the long- and short-term rates is diminishing and, in some cases, turning negative. This is of interest to both sides in the ocean freight value chain.

“On the carrier side they might be able to tempt those shipping large volumes from the Far East to the US to sign up to long-term contracts, instead of playing the spot market. On the other hand, the falling spot price gives shippers looking to improve supply chain resilience an opportunity to strike a better balance between long- and short-term rate strategies. Those with an eye on the latest market data will be at an advantage here.”

Negative moves

Long-term rates for the trades are, at present, “moving sideways” according to Sand, while spots continue to dip. Short-term rates on the West Coast routes are already below long-term prices, with the same “negative spread” likely to take place later in August on the Far East – US East Coast trade.

“It’ll be interesting to see what happens to the long-term rates in this climate of change,” he adds.

East Coast muscle

For the time being, as of 9 August, the spot rates for the Far East to the US West Coast are USD 6 400 per FEU and USD 9 300 per FEU for the US East Coast. This demonstrates the strength of the East Coast routes at the moment (with carriers shifting capacity to counter congestion issues and bottlenecks on the West), with an almost USD 3 000 premium. Traditionally, costs have stood ‘just’ USD 1 000 higher for shipping a 40′ container from the Far East to the US East Coast than to the West.

Long-term rates to the East Coast are also above those of their sister coast, with a USD 1 900 per FEU premium on 9 August.

Oslo-based Xeneta’s unique software platform compiles the latest ocean and air freight rate data aggregated worldwide to deliver powerful market insights. Participating companies include ABB, Electrolux, Continental, Unilever, Nestle, L’Oréal, Thyssenkrupp, Volvo Group and John Deere, amongst others.

To sign up to Xeneta’s weekly container rates blog please visit www.xeneta.com/blog

Positions of power

The latest data comes courtesy of Oslo-based Xeneta, which crowd sources real-time rates from leading shippers to produce the Long-Term XSI® Public Indices, delivering detailed insights of the very latest market movements. Those movements have been following a familiar trajectory throughout the course of 2021, with climbing rates fuelled by demand outpacing supply, supply chain disruption, and the ongoing impact of COVID-19.

“In the context of 2021, a 2.2% monthly increase in rates appears modest, but in any other year this is an excellent result for carriers,” notes Patrik Berglund, Xeneta CEO.

“Remember, this is yet another rise on the back of the largest ever monthly increase in July. So, while some may have been expecting – read ‘hoping for’ if you’re a cargo owner – an adjustment downwards, we’re seeing a further demonstration of the powerful position liner operators find themselves in. They really are holding all the cards… and winning big.”

Proof of this lies in the latest set of financial results released by key carriers.

Record revenues

August saw OOIL disclose a net profit of USD 2.8bn for the half-year, the best results in the group’s history, while Zim reported a net profit of USD 888m for the second quarter. This figure is higher than the Israeli line’s accumulated total profits for the last five years, showcasing a spectacular turnaround.

The firm, like its peers, is now looking to expand to take advantage of what Berglund calls “red hot” market conditions.

Steady gains

August’s XSI® demonstrates that the heat is on across all major trading corridors, with every region seeing import and export benchmarks edging upwards. In Europe imports rose by 0.5%, while exports climbed 3.4%. Although the pace of growth has slowed compared to recent months, it still leaves the respective benchmarks up 123% and 49.1% year-on-year.

Results in the Far East followed a similar pattern, with imports nudging up a further 0.8% (up 50.5% since August 2020) and exports jumping by 2.5% (a massive 115.5% up year-on-year). The XSI® paints the same picture in the US, where imports increased by an additional 2.1% and exports climbed 0.6% month-on-month. The benchmarks now stand 67.2% and 16.8% up compared to the same time last year.

Seen as a whole, the XSI® is now scaling record heights and, Berglund suggests, there’s little evidence of the curve pointing downwards in the immediate future.

Cycle of delays

“While we can’t be certain of a repeat of the astronomical monthly increases the industry has grown accustomed to, further gains are certainly not of the question,” he comments.

“There’s still a dearth of equipment, high demand and, worryingly, very congested ports that are choking up the supply chain for shippers and retailers.  For example, in Europe Maersk is advising customers of wait times up to 10 days at Antwerp, while Hapag-Lloyd reports that voyage delays have tripled in the first half of 2021 compared to the same period in 2020. A round trip between the Far East and Europe now takes approximately 100 days to complete. The situation isn’t much better in the US with wait times of five days (and increasing) at the Port of Los Angeles.”

The Xeneta CEO says landside infrastructure is “simply overwhelmed”, with the congestion tying up vessels , and their sought after containers, in an ever-worsening cycle of delays.

“With the holiday season logistical rush round the corner things may get worse before they get better,” concludes Berglund, “and that’ll have an obvious knock-on effect on rates. As ever, we’d advise all parties in the chain to keep up to date with the very latest intelligence to understand, and get value out of, this extraordinarily competitive 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, Nestle, L’Oréal, Thyssenkrupp, Volvo Group and John Deere, amongst others.

To get the full XSI® Public Indices report for the long-term market, please visit: https://www.xeneta.com/xsi-public-indices

To see daily XSI® short-term market rate movements for 12 main trade lanes, please visit https://xsi.xeneta.com.

XSI® effectively takes the temperature of the long-term contracted market, capturing the latest rates from leading shippers, utilizing over 200 million data points, with more than 160,000 port-to-port pairings. That temperature is currently through the roof, with congested ports, a lack of equipment and lop-sided demand putting container shipping companies in a position of unparalleled strength during negotiations.

Breath-taking development

“The market is capturing headlines, worldwide, and far beyond the confines of the trade press, with unprecedented demand for containers driving up prices to new heights,” comments Xeneta CEO Patrik Berglund. “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.”

He continues: “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 amongst essential workers. Again, Los Angeles/Long Beach has been impacted here, only heightening the sense of turmoil.

“This is an extreme situation and the rate of development is breath-taking. Negotiations are understandably difficult at present, so the latest market intelligence is more important than ever when trying to obtain optimal business value.”

Regional ramifications

The sense of turbulence is evident in the XSI® round-up of regional imports and exports on key corridors. In Europe, imports notched up their highest ever monthly XSI® increase, surging by 19.3% – mostly driven by flows from Asian origins – leaving the
benchmark up 12.5% year-on-year. However, the supply demand imbalance is clearly evident on the export side, with a 1.9% fall, down 1.6% compared to January 2020.

In the Far East the picture was reversed, with exports climbing by an impressive 15.1% (leaving the index at an all-time high – up 17.3% year-on-year), while the import figure fell 4.6%, down 11.1% against this time last year. The US import benchmark showed somewhat less volatility overall, with a rise of 0.7%, moving up 0.5% year-on-year. Some US importers seem to have been able to compensate for the vast increases on the trans-Pacific with decreases on other import trades. However, exports fell by their second-largest ever recorded dip, with the figure dropping 6.2%. This moves the index down an eye-catching 17.7% year-on-year.

Challenge and opportunity

“What will happen next?” asks Berglund. “It’s impossible to say with any confidence, but we can no doubt expect further change. We know that Beijing is keen to stabilize 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 (CU 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 (PIL) 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.”

Flexibility pays

With the ongoing pandemic situation, the opportunity for a significant geopolitical reset, and continued economic uncertainty, formulating a clear approach for the next phase of rate development is problematic, concludes Berglund. The Xeneta CEO advises “flexibility in procurement strategies” for shippers, trying to maintain steady supply chains while not committing 100% to long-term contracts at all-time high rates.

“A limber approach is probably the best way to navigate this dynamic rates environment,” he says, “utilising the very latest market insights to make the best business decisions and seize opportunity wherever possible. One thing is for sure, 2021 will be another gripping year for all stakeholders in this truly unique segment.”

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.

To get the full XSI® Public Indices report, please visit: https://www.xeneta.com/xsi-public-indices