May saw the highest ever monthly increase in long-term contracted ocean freight rates, as the cost of locking in container shipments soared by 30.1%. The unprecedented hike, revealed in the latest Xeneta Shipping Index (XSI®) Public Indices for the contract market, means that long-term rates are now 150.6% up year-on-year. In 2022 alone, costs have climbed by 55%.
“This is a staggering development,” comments Xeneta CEO Patrik Berglund. “Just last month we were looking at an 11% rise and questioning how such continued gains were possible. Now we see a monthly increase of almost a third blowing the previous XSI® records out the water.
“The breath-taking gains reflect the sharp increase of the average of all valid long-term contracts, as older contracts, with lower rates, expire and are replaced by newer agreements with much higher rates. It’s certainly a challenging time to be a shipper.”
Oslo-based Xeneta’s XSI® is compiled from real-time data crowdsourced from leading shippers, delivering in-depth insights into key global trades. In May, the most dramatic development was seen in US import costs, which jumped by 65.1% to stand 205.4% up year-on-year, as new long-term contracts (which usually run from the start of May to April) came into force. The XSI® US export benchmark showed a less pronounced, but still strong, upwards move of 9.9%.
European long-term rates rose by 11.3% on the import index (122% up year-on-year), while exports recorded their largest ever monthly jump of 27.6%, an impressive 138.3% increase on May 2021. Far East import and export indices both raced upwards, with the former rising by 17.4% and the latter soaring 35.4%, the largest ever monthly rise for this measure. Seen from a year-on-year perspective, the respective benchmarks stand 57.1% and 174.8% up.
“It goes without saying that the main carriers are achieving astronomical results at the moment,” Berglund notes. “Last month we saw deeply impressive figures from OOCL and Maersk and now we have Zim posting a 113% year-on-year revenue jump, with an EBITDA of USD 2.5bn. As a result, the management team has upgraded its full-year EBITDA to USD 7.8-8.2 bn.
“Shippers, on the other hand, are being bled dry, while the lockdowns in China, allied to blanked sailings from the carriers to protect softening spot rates, have, and may continue to, impact upon the supply chain. Not as much cargo as anticipated has been moved over the last couple of months and, with the peak season approaching, that could cause added disruption. That leaves shippers in a position where they’re paying through the nose for services that, to be diplomatic, may not always meet expectations.”
With the difficultly of predicting developments on even a month-to-month basis, Berglund says that mid- to long-term forecasts are “nigh on impossible”. Continuing regulatory investigations into carrier practices could impact on business fortunes (although no evidence of collusion or unfair practices have been uncovered so far), while China’s zero COVID policy may continue to hit industrial and manufacturing output. Exactly how these things progress, not to mention the ongoing ramifications of geopolitical upheaval, casts a shadow of uncertainty over those looking to tailor the best logistics solutions for long-term needs.
“The best advice we can offer, as ever,” concludes Berglund, “is to try and stay as strategically limber as possible, while always keeping up to date with the very latest industry intelligence. In a fast-moving market, that really is the only way to achieve the optimal value for your business and stakeholders.”
Xeneta’s XSI® is compiled from the latest crowd-sourced ocean freight rate data aggregated worldwide. Companies participating in the benchmarking and market analytics platform include names such as ABB, Electrolux, Continental, Unilever, Nestle, L’Oréal, Thyssenkrupp, Volvo Group and John Deere, amongst others.