Xeneta Shipping Index hits new high but have rates peaked?
July's increases are slowest since January with upward pressure on long-term agreements easing as spot rates decline.
The global Xeneta Shipping Index (XSI) rose again in July to 435.2 points - the fifth month in a row that the index has hit a new record high.
The valid long-term agreements, according to XSI, stand 112 percent higher than this time last year and a massive 280 percent higher against July 2019.
"Despite the indications that we may have reached a peak and that prices of new agreements are more likely to hold than suddenly leap up again, there is little comfort for shippers that have been continually battered by a market in overdrive and seeing prices stabilising at historically high levels," says an official release.
"The carriers have enjoyed staggering rate rises, driven by factors such as strong demand, a lack of equipment, congestion and Covid uncertainty for 17 of the last 19 months," says Patrik Berglund, CEO, Xeneta. "July has seen yet more upticks across the board but the signs are clear there is a 'shift' in sentiment as some fundamentals evolve."
Berglund adds that July's increases are the slowest since January with upward pressure on long-term agreements easing as spot rates fall across major trades. "In addition, volumes on many corridors are down with, for example, containerised European imports falling by 3 percent and exports 6 percent in the first five months of 2022."
"The tide is turning around as shippers have an upper hand now in arm-twisting carriers to align long-term contracted rates with the fast-dropping spot rates," says Peter Sundara Swamickannu, Head of Global Ocean Freight at a major Singapore-based cargo owner. "Anecdotal evidence indicates shippers and freight forwarders are being approached by ocean carriers to support specific trade lanes or port pairs where space has opened."
Congestion getting worse at U.S. East Coast
Several major container ports on the U.S. East Coast are experiencing elevated levels of congestion but a few remain relatively free flowing and uncongested, according to the latest update from Vivek Srivastava, Senior Trade Analyst, VesselsValue.
"As container lines reposition services away from the U.S. West Coast where waiting times hit once-in-a generation levels over the global Covid-19 pandemic, the strain on East Coast logistics has increased considerably. Of the top ten U.S. East Coast container terminals, four currently exhibit long waiting times. These are New York and Elizabeth APM Terminals (both part of the Port of New York) and Garden City and Savannah Terminal (both Port of Savannah).
"As shown in Figure 1, average waiting times at the Port of New York have oscillated between 20 and 50 hours for most of this year. This is far higher than last year's levels, which rarely exceeded 20 hours, and the three average, which rarely exceeded 10 hours."
Six of the top ten terminals, however, continue to function normally and exhibit relatively short waiting times, Srivastava added. "These are Norfolk International and Virginia International Gateway Terminals (both Port of Norfolk), Maher and Port Newark Terminals (both Port of New York), Packer Avenue Terminal (Port of Philadelphia) and Wando Welch Terminal (Port of Charleston)."
Shippers and lines that have any flexibility in their schedules should consider alternative routes into key markets such as the U.S. East Coast, Srivastava said.
U.S West Coast backup swings daily
Container ships backed up across Los Angeles/Long Beach/Huntington ports totalled 26 on July 27, 2022, three more than the previous day.
"The 26 container ships backed up include three container ships anchored or loitering awaiting a berth off the ports + 23 slow speed steaming or loitering outside the Safety and Air Quality Area (SAQA)," according to data from Joyce Kaplan, Office Manager, Marine Exchange of Southern California.
The 26 container ships in the backup are 83 fewer than the record of 109 on January 9, 2022.