News / Forwarders 'being squeezed' as spot and contract rates move further apart

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Rapidly increasing spot freight rates are diverging further from contract rates, imitating the pattern seen during the pandemic, leaving large shippers in a better position than SMEs and freight forwarders, according to freight rate benchmarking platform Xeneta.  

Xeneta market analyst Emily Stausboll said: “Some of our customers are saying this brings back pandemic memories, and there are very few that have pleasant memories from that time.” 

In yesterday’s ocean freight webinar, Xeneta presented a comparison of Asia-Mediterranean spot rates at 1 December 2020 versus the start of the Red Sea crisis, from 1 January 2024. 

Source: Xeneta.com

The graph indicates that, while at the start of both crises the market reacted similarly, the Red Sea crisis was more quickly mitigated, meaning rates did not inflate in the same way. 

“That’s day 180, where we are at now. If you look at the next graph, this is where the bad memories will really come up,” she warned.  

Source: Xeneta.com

She highlighted the large upward hike during Covid at around day 100, and noted that another year elapsed before the peak of $14,000. 

“I’m by no means saying this is going to happen this time, but I’m also not going to say that it’s not going to,” said Ms Stausboll. 

Xeneta chief analyst Peter Sand warned that “what you pay depends on you either being very very good at negotiating, if you are a super-large shipper or you are an SME shipper.” 

According to Xeneta data, SMEs are often paying more than the market average, whereas larger players on average pay less, due to carriers honouring long-term contracts to maintain relationships.  

“The prices paid by SMEs were top dollar. Shippers are constantly under-informed, trying to manage their own set of supply chains while struggling to ensure inventories are ready for whatever upcoming season comes about, and, as you can see right now, it’s very much about paying up,” said Mr Sand. 

Ms Stausboll added: “The big shippers working straight with their carriers are probably in the best situation. A little shipper  working with a SME freight forwarder is seeing a completely different picture of the market.” 

But she acknowledged: “It’s not only the shippers, it’s also the freight forwarders that are being pushed in different ways.” 

Mr Sand added: “Obviously freight forwarders, being the middlemen of the container shipping market, are definitely feeling the highs and lows, and they are also getting squeezed by those delivering the final service – the container lines.” 

But “the real headache”, according to Ms Stausboll, is the consequence of the rapidly increasing spot market diverging further from contract rates. 

“This is where you see cargo getting rolled, you see freight forwarders in particular getting pushed onto premium rates and shippers are caught a bit in the middle. 

“Am I still going to be able to move my contracted volumes at the rate agreed, or am I going to be pushed several thousand dollars up to secure my space? That’s causing real problems for many shippers and forwarders,” she said. 

Mr Sand concluded: “The jury is definitely out on how high rates will go; we currently forecast that they will go up as we enter July, and probably more after that. 

“Things are set to get worse before they get better.”