The container shipping industry experienced a significant downturn in global long-term freight rates during the month of May, as the contracted cost of shipping containers plummeted by a staggering 27.5%, according to Xeneta’s Shipping Index (XSI®). This marks the ninth consecutive month of rate drops and represents the largest monthly fall ever recorded on the platform.
“If industry observers were left wondering just how bad it could get for carriers after the 10% fall in long-term rates seen in April, here’s the answer,” said Patrik Berglund, the CEO of Oslo-based Xeneta. “This is the largest drop we’ve ever experienced on the XSI®, which charts real-time global rate developments, and it paints a bleak picture of the state of the industry.”
Xeneta believes the collapse of long-term freight rates reflects a new market reality.
Berglund emphasized that while monthly declines have become the ‘new normal’ this year, “this is a collapse,” he said.
“The reasons behind that are manifold, but the main driver is the fact that May marks the point when existing 12-month contracts in the US come to a conclusion and new agreements come into force,” Berglund explains. “These reflect the reality of today’s subdued markets, so are priced much, much lower than their predecessors. The impact of that on the wider industry is here for all to see.”
The decline in long-term rates is particularly noteworthy coming after the pandemic-driven freight rates surge. However, Berglund believes that era is now “well and truly over.”
“The global XSI® is now down 42% year-on-year. With continued macroeconomic uncertainty, evaporating trade volumes, and a wider sense of geopolitical flux, short-term industry forecasts do not suggest a return to profitability anytime soon,” said Berglund. “This is a cause for concern for carriers who are tirelessly managing capacity by adjusting vessel speeds, restructuring services, and blanking sailings, but all their efforts seem to be in vain. Those with significant exposure to long-term contracts will increasingly feel the financial strain.”
Taking a regional perspective, the XSI® highlights the significant decline in long-term developments in the US. The US import sub-index witnessed a staggering 40.6% month-on-month collapse, resulting in a 54.6% loss in value since its peak in October of the previous year.
In dollar terms, this translates to a USD 6,140 decrease per FEU (forty-foot equivalent unit) in the average contracted price of shipping containers between the Far East and the US West Coast compared to the previous year, representing a massive 76% drop on this major global route, according to Xeneta. Total import volumes reveal a grim reality, with volumes into the US down by 21.1% in the first quarter, while those originating from the Far East are down 25.9%. However, there was limited growth in the US export sub-index, recording a 5.1% month-on-month increase.
The decline in the US import sub-index was only matched by the decline in Far East exports, which fell by 38.6% in May alone. This sub-index has now lost over half its value in 2023 and is down by 58.5% compared to the previous year. In terms of volume, containerized exports from the Far East experienced a 10.5% decline in the first quarter and are now only 3.3% higher compared to the figures from the same period in 2019.
“With demand for containerized exports out of the Far East falling, and a lack of hunger for imports into the US, we have something of a ‘retreat’ in the two forces that traditionally drive global trade growth,” Berglund notes. “There’s very little the carriers can do to protect their precious long-term rates in this kind of climate, especially when we consider that the vessels ordered during the pandemic ‘boom’ are now starting to swell overall industry capacity.
“This is a headline grabbing monthly drop in contracted rates,” he concludes, “but it’s not the end of the story. More developments await on the horizon in what will be a very challenging year for the carrier community. Watch this space.”
Copyright : https://gcaptain.com
The container shipping industry experienced a significant downturn in global long-term freight rates during the month of May, as the contracted cost of shipping containers plummeted by a staggering 27.5%, according to Xeneta’s Shipping Index (XSI®). This marks the ninth consecutive month of rate drops and represents the largest monthly fall ever recorded on the platform.
“If industry observers were left wondering just how bad it could get for carriers after the 10% fall in long-term rates seen in April, here’s the answer,” said Patrik Berglund, the CEO of Oslo-based Xeneta. “This is the largest drop we’ve ever experienced on the XSI®, which charts real-time global rate developments, and it paints a bleak picture of the state of the industry.”
Xeneta believes the collapse of long-term freight rates reflects a new market reality.
Berglund emphasized that while monthly declines have become the ‘new normal’ this year, “this is a collapse,” he said.
“The reasons behind that are manifold, but the main driver is the fact that May marks the point when existing 12-month contracts in the US come to a conclusion and new agreements come into force,” Berglund explains. “These reflect the reality of today’s subdued markets, so are priced much, much lower than their predecessors. The impact of that on the wider industry is here for all to see.”
The decline in long-term rates is particularly noteworthy coming after the pandemic-driven freight rates surge. However, Berglund believes that era is now “well and truly over.”
“The global XSI® is now down 42% year-on-year. With continued macroeconomic uncertainty, evaporating trade volumes, and a wider sense of geopolitical flux, short-term industry forecasts do not suggest a return to profitability anytime soon,” said Berglund. “This is a cause for concern for carriers who are tirelessly managing capacity by adjusting vessel speeds, restructuring services, and blanking sailings, but all their efforts seem to be in vain. Those with significant exposure to long-term contracts will increasingly feel the financial strain.”
Taking a regional perspective, the XSI® highlights the significant decline in long-term developments in the US. The US import sub-index witnessed a staggering 40.6% month-on-month collapse, resulting in a 54.6% loss in value since its peak in October of the previous year.
In dollar terms, this translates to a USD 6,140 decrease per FEU (forty-foot equivalent unit) in the average contracted price of shipping containers between the Far East and the US West Coast compared to the previous year, representing a massive 76% drop on this major global route, according to Xeneta. Total import volumes reveal a grim reality, with volumes into the US down by 21.1% in the first quarter, while those originating from the Far East are down 25.9%. However, there was limited growth in the US export sub-index, recording a 5.1% month-on-month increase.
The decline in the US import sub-index was only matched by the decline in Far East exports, which fell by 38.6% in May alone. This sub-index has now lost over half its value in 2023 and is down by 58.5% compared to the previous year. In terms of volume, containerized exports from the Far East experienced a 10.5% decline in the first quarter and are now only 3.3% higher compared to the figures from the same period in 2019.
“With demand for containerized exports out of the Far East falling, and a lack of hunger for imports into the US, we have something of a ‘retreat’ in the two forces that traditionally drive global trade growth,” Berglund notes. “There’s very little the carriers can do to protect their precious long-term rates in this kind of climate, especially when we consider that the vessels ordered during the pandemic ‘boom’ are now starting to swell overall industry capacity.
“This is a headline grabbing monthly drop in contracted rates,” he concludes, “but it’s not the end of the story. More developments await on the horizon in what will be a very challenging year for the carrier community. Watch this space.”
Copyright : https://gcaptain.com
The container shipping industry experienced a significant downturn in global long-term freight rates during the month of May, as the contracted cost of shipping containers plummeted by a staggering 27.5%, according to Xeneta’s Shipping Index (XSI®). This marks the ninth consecutive month of rate drops and represents the largest monthly fall ever recorded on the platform.
“If industry observers were left wondering just how bad it could get for carriers after the 10% fall in long-term rates seen in April, here’s the answer,” said Patrik Berglund, the CEO of Oslo-based Xeneta. “This is the largest drop we’ve ever experienced on the XSI®, which charts real-time global rate developments, and it paints a bleak picture of the state of the industry.”
Xeneta believes the collapse of long-term freight rates reflects a new market reality.
Berglund emphasized that while monthly declines have become the ‘new normal’ this year, “this is a collapse,” he said.
“The reasons behind that are manifold, but the main driver is the fact that May marks the point when existing 12-month contracts in the US come to a conclusion and new agreements come into force,” Berglund explains. “These reflect the reality of today’s subdued markets, so are priced much, much lower than their predecessors. The impact of that on the wider industry is here for all to see.”
The decline in long-term rates is particularly noteworthy coming after the pandemic-driven freight rates surge. However, Berglund believes that era is now “well and truly over.”
“The global XSI® is now down 42% year-on-year. With continued macroeconomic uncertainty, evaporating trade volumes, and a wider sense of geopolitical flux, short-term industry forecasts do not suggest a return to profitability anytime soon,” said Berglund. “This is a cause for concern for carriers who are tirelessly managing capacity by adjusting vessel speeds, restructuring services, and blanking sailings, but all their efforts seem to be in vain. Those with significant exposure to long-term contracts will increasingly feel the financial strain.”
Taking a regional perspective, the XSI® highlights the significant decline in long-term developments in the US. The US import sub-index witnessed a staggering 40.6% month-on-month collapse, resulting in a 54.6% loss in value since its peak in October of the previous year.
In dollar terms, this translates to a USD 6,140 decrease per FEU (forty-foot equivalent unit) in the average contracted price of shipping containers between the Far East and the US West Coast compared to the previous year, representing a massive 76% drop on this major global route, according to Xeneta. Total import volumes reveal a grim reality, with volumes into the US down by 21.1% in the first quarter, while those originating from the Far East are down 25.9%. However, there was limited growth in the US export sub-index, recording a 5.1% month-on-month increase.
The decline in the US import sub-index was only matched by the decline in Far East exports, which fell by 38.6% in May alone. This sub-index has now lost over half its value in 2023 and is down by 58.5% compared to the previous year. In terms of volume, containerized exports from the Far East experienced a 10.5% decline in the first quarter and are now only 3.3% higher compared to the figures from the same period in 2019.
“With demand for containerized exports out of the Far East falling, and a lack of hunger for imports into the US, we have something of a ‘retreat’ in the two forces that traditionally drive global trade growth,” Berglund notes. “There’s very little the carriers can do to protect their precious long-term rates in this kind of climate, especially when we consider that the vessels ordered during the pandemic ‘boom’ are now starting to swell overall industry capacity.
“This is a headline grabbing monthly drop in contracted rates,” he concludes, “but it’s not the end of the story. More developments await on the horizon in what will be a very challenging year for the carrier community. Watch this space.”
Copyright : https://gcaptain.com
The container shipping industry experienced a significant downturn in global long-term freight rates during the month of May, as the contracted cost of shipping containers plummeted by a staggering 27.5%, according to Xeneta’s Shipping Index (XSI®). This marks the ninth consecutive month of rate drops and represents the largest monthly fall ever recorded on the platform.
“If industry observers were left wondering just how bad it could get for carriers after the 10% fall in long-term rates seen in April, here’s the answer,” said Patrik Berglund, the CEO of Oslo-based Xeneta. “This is the largest drop we’ve ever experienced on the XSI®, which charts real-time global rate developments, and it paints a bleak picture of the state of the industry.”
Xeneta believes the collapse of long-term freight rates reflects a new market reality.
Berglund emphasized that while monthly declines have become the ‘new normal’ this year, “this is a collapse,” he said.
“The reasons behind that are manifold, but the main driver is the fact that May marks the point when existing 12-month contracts in the US come to a conclusion and new agreements come into force,” Berglund explains. “These reflect the reality of today’s subdued markets, so are priced much, much lower than their predecessors. The impact of that on the wider industry is here for all to see.”
The decline in long-term rates is particularly noteworthy coming after the pandemic-driven freight rates surge. However, Berglund believes that era is now “well and truly over.”
“The global XSI® is now down 42% year-on-year. With continued macroeconomic uncertainty, evaporating trade volumes, and a wider sense of geopolitical flux, short-term industry forecasts do not suggest a return to profitability anytime soon,” said Berglund. “This is a cause for concern for carriers who are tirelessly managing capacity by adjusting vessel speeds, restructuring services, and blanking sailings, but all their efforts seem to be in vain. Those with significant exposure to long-term contracts will increasingly feel the financial strain.”
Taking a regional perspective, the XSI® highlights the significant decline in long-term developments in the US. The US import sub-index witnessed a staggering 40.6% month-on-month collapse, resulting in a 54.6% loss in value since its peak in October of the previous year.
In dollar terms, this translates to a USD 6,140 decrease per FEU (forty-foot equivalent unit) in the average contracted price of shipping containers between the Far East and the US West Coast compared to the previous year, representing a massive 76% drop on this major global route, according to Xeneta. Total import volumes reveal a grim reality, with volumes into the US down by 21.1% in the first quarter, while those originating from the Far East are down 25.9%. However, there was limited growth in the US export sub-index, recording a 5.1% month-on-month increase.
The decline in the US import sub-index was only matched by the decline in Far East exports, which fell by 38.6% in May alone. This sub-index has now lost over half its value in 2023 and is down by 58.5% compared to the previous year. In terms of volume, containerized exports from the Far East experienced a 10.5% decline in the first quarter and are now only 3.3% higher compared to the figures from the same period in 2019.
“With demand for containerized exports out of the Far East falling, and a lack of hunger for imports into the US, we have something of a ‘retreat’ in the two forces that traditionally drive global trade growth,” Berglund notes. “There’s very little the carriers can do to protect their precious long-term rates in this kind of climate, especially when we consider that the vessels ordered during the pandemic ‘boom’ are now starting to swell overall industry capacity.
“This is a headline grabbing monthly drop in contracted rates,” he concludes, “but it’s not the end of the story. More developments await on the horizon in what will be a very challenging year for the carrier community. Watch this space.”
Copyright : https://gcaptain.com
The container shipping industry experienced a significant downturn in global long-term freight rates during the month of May, as the contracted cost of shipping containers plummeted by a staggering 27.5%, according to Xeneta’s Shipping Index (XSI®). This marks the ninth consecutive month of rate drops and represents the largest monthly fall ever recorded on the platform.
“If industry observers were left wondering just how bad it could get for carriers after the 10% fall in long-term rates seen in April, here’s the answer,” said Patrik Berglund, the CEO of Oslo-based Xeneta. “This is the largest drop we’ve ever experienced on the XSI®, which charts real-time global rate developments, and it paints a bleak picture of the state of the industry.”
Xeneta believes the collapse of long-term freight rates reflects a new market reality.
Berglund emphasized that while monthly declines have become the ‘new normal’ this year, “this is a collapse,” he said.
“The reasons behind that are manifold, but the main driver is the fact that May marks the point when existing 12-month contracts in the US come to a conclusion and new agreements come into force,” Berglund explains. “These reflect the reality of today’s subdued markets, so are priced much, much lower than their predecessors. The impact of that on the wider industry is here for all to see.”
The decline in long-term rates is particularly noteworthy coming after the pandemic-driven freight rates surge. However, Berglund believes that era is now “well and truly over.”
“The global XSI® is now down 42% year-on-year. With continued macroeconomic uncertainty, evaporating trade volumes, and a wider sense of geopolitical flux, short-term industry forecasts do not suggest a return to profitability anytime soon,” said Berglund. “This is a cause for concern for carriers who are tirelessly managing capacity by adjusting vessel speeds, restructuring services, and blanking sailings, but all their efforts seem to be in vain. Those with significant exposure to long-term contracts will increasingly feel the financial strain.”
Taking a regional perspective, the XSI® highlights the significant decline in long-term developments in the US. The US import sub-index witnessed a staggering 40.6% month-on-month collapse, resulting in a 54.6% loss in value since its peak in October of the previous year.
In dollar terms, this translates to a USD 6,140 decrease per FEU (forty-foot equivalent unit) in the average contracted price of shipping containers between the Far East and the US West Coast compared to the previous year, representing a massive 76% drop on this major global route, according to Xeneta. Total import volumes reveal a grim reality, with volumes into the US down by 21.1% in the first quarter, while those originating from the Far East are down 25.9%. However, there was limited growth in the US export sub-index, recording a 5.1% month-on-month increase.
The decline in the US import sub-index was only matched by the decline in Far East exports, which fell by 38.6% in May alone. This sub-index has now lost over half its value in 2023 and is down by 58.5% compared to the previous year. In terms of volume, containerized exports from the Far East experienced a 10.5% decline in the first quarter and are now only 3.3% higher compared to the figures from the same period in 2019.
“With demand for containerized exports out of the Far East falling, and a lack of hunger for imports into the US, we have something of a ‘retreat’ in the two forces that traditionally drive global trade growth,” Berglund notes. “There’s very little the carriers can do to protect their precious long-term rates in this kind of climate, especially when we consider that the vessels ordered during the pandemic ‘boom’ are now starting to swell overall industry capacity.
“This is a headline grabbing monthly drop in contracted rates,” he concludes, “but it’s not the end of the story. More developments await on the horizon in what will be a very challenging year for the carrier community. Watch this space.”