The shipping industry is facing an unprecedented drop in long-term rates.

During the month of May, the shipping industry experienced a 27.5% drop in global freight rates, according to the Xeneta Shipping Index (XSI). This would be the 9th consecutive month of rate falls, this being the month with the most abrupt drop.

According to the Xeneta team, this collapse in long-term freight rates reflects a new market reality. Patrik Berglund, CEO of Xeneta, says “this is the new normal, this is a meltdown”

Explains Berglund, “The reasons behind this are multiple, but the main driver is the fact that May marks the point at which existing 12-month contracts in the United States come to an end and new agreements come into effect. .”

The decline in long-term rates is quite noticeable after the skyrocketing increase caused by the pandemic. It can be said that we are currently at a point of being a moderate market, since the prices are well below the previous ones.

A return to profitability cannot be expected any time soon, according to Berglund, with the XSI down 42% year-over-year compounded by continued macroeconomic uncertainty, evaporating trade volumes and a broader sense of geopolitical flux.

As a clear example of this rate reduction, there was a 76% drop in the average price of containers shipped between the Far East and the west coast of the United States. Taking this country as a reference, the import index has dropped 21.1% so far in the first quarter of the year, and with respect to exports, it has only grown 5% monthly.

“This is a headline-grabbing monthly drop in contracted rates,” Berglund concludes, “but it’s not the end of the story. More developments are on the horizon in what will be a very challenging year for the operator community. Look at this space.”

gCaptain (2023) Container Shipping Industry Faces Unprecedented Slump in Long-Term Rates.
 https://gcaptain.com/container-shipping-industry-faces-unprecedented-slump-in-long-term-rates/