Xeneta: Container Rates Set New Records with Little Relief Ahead

Container shipping rates are continuing the unprecedented rise to previously unthinkable levels. A new market analysis from the benchmarking and market intelligence platform Xeneta highlights the surge in rates while also predicting that little relief is in sight in the near term for shippers.

July saw the container shipping industry enter uncharted water, as long-term contracted rates surged by their largest-ever monthly increase, climbing by close to one-third, according to the data from Xeneta. A review of rates data from leading shippers shows a more than a quarter increase in Xeneta’s XSI Public Indices more than double the previous single monthly increases of just over 11 percent in May 2019. The benchmark has risen by nearly three-quarters since July 2020 with almost all of the increase coming in 2021.

“This is a truly breath-taking development,” comments Patrik Berglund, CEO of Oslo-based Xeneta. “We’ve seen a combination of high demand, under capacity, and supply chain disruption (in part down to COVID and port congestion) driving rates ever higher this year, but nobody could have anticipated a hike of this magnitude. The industry is in overdrive. It’s difficult to see – unless something radical transpires – any relief on the immediate horizon for the shipper community. Quite frankly, I’ve never seen anything like it.”

The index provides real-time market intelligence from global shippers and in July it revealed unprecedented shifts, with rates in Europe leading the way. The import benchmark spiked by a massive 49 percent driving prices to an all-time high. Xeneta notes that the spot market set the course for the jump, with Freight All Kind, FAK, rates surpassing $13,000 per FEU. Import rates are up 120 percent year-on-year, according to Xeneta. Exports also recorded their largest ever monthly increase, although by a more modest 16 percent and in total up nearly 40 percent since July 2020.

The Far East indices followed suit, with a record-breaking 24 percent rise in export rates (up 110 percent year-on-year) while imports edged up by 7.3 percent (43 percent higher than in July 2020). In the US, the XSI index revealed a nearly 18 percent surge in import rates – representing another all-time high – taking the benchmark to 61 percent above July last year. Exports also demonstrated strong gains, with an 11 percent climb.

Despite what Berglund describes as “a crazy market” he notes that the majority of Xeneta users shipping large volumes report long-term contracts are mostly being honored by carriers. This, he says, is better than the beginning of the summer, when the fear of rolled cargoes and broken agreements was front of mind for a stressed shipper community.

“However,” he states, “bear in mind that volume flexibility is totally gone, with shippers committing to maximum quantities to secure positions onboard. Furthermore, all around the world, but especially in the US, shippers are playing safe and building buffer agreements to ensure they’re covered for the holiday season. As such, a ‘bullwhip effect’ is coming into play, as shippers order more to protect against delayed shipments and rollovers, further disrupting the supply chain. But, of course, who can blame them – they see it as the only way to stay ahead and make sure Christmas is saved.”

Xeneta points to a glut of newbuild orders from key shipping lines scrambling to meet demand and secure market positions. They noted that reports suggest that more than 300 vessels have been ordered this year, but those vessels will take time to build before they can add capacity to address the current imbalances. 

“Shippers need short-term solutions, with greater reliability, easier negotiations, and more sympathetic rates soon, rather than the promise of long-term relief,” Berglund stresses. “We’re already seeing some taking matters into their own hands, chartering vessels and joining with purchasing associations in attempts to free themselves from the grip of traditional carriers.”

They noted that some carriers, such as Evergreen and CMA CGM are bringing large boxships online due to orders placed years ago while others continue to scramble to address capacity issues. The high rates are also attracting other carriers to explore entry into new markets. 

“For the time being carriers have the fundamentals firmly in their favor and are enjoying time in the sun, as illustrated by recent earnings reports from major players such as from Maersk and Hapag Lloyd,” concluded Berglund.  

Companies participating in Oslo-based Xeneta’s crowd-sourced ocean and air freight rate benchmarking and market analytics platform include ABB, Electrolux, Continental, Unilever, Nestle, L’Oréal, Thyssenkrupp, Volvo Group, and John Deere.