News / Forwarders undercutting ocean carriers – but it's a gamble, says Xeneta

20/12/2023

Freight forwarders are offering cheaper rates than carriers in their 2024 contracts, according to the latest data from Xeneta.

The analytics platform compiled data from eight trades to benchmark rates for 2024, and defined “new 2024 rates” as contracts which have been signed or tabled with a minimum 12-month duration since November.

It found that, on major trades out of the Far East into North Europe and the US west coast this year, carriers were cheaper than forwarders on long-term rates.

However, the latest analysis reveals freight forwarders are now offering cheaper rates than carriers.

It said: “Between the Far East and North Europe, 2024 rates from carriers average $1,500 per feu, which is $300 higher than rates being offered by freight forwarders.”

The outcome of this, however, “will depend on the buying strategy of each freight forwarder”.

Xeneta explained: “If a freight forwarder agrees to a long-term contract for 2024 with a shipper, but decides to play on the spot market, they are betting against rates increasing above the contracted rate during 2024.”

However, it added: “If the freight forwarder decides to buy freight from a carrier up front, then they are locked into a rate and are hedging their bets against prices falling below contracted rates during 2024.

“Are you feeling lucky?”

Emily Stausbøll, Xeneta market analyst, said: “2024 has the potential to be a tricky year for freight forwarders… they are going to have to make careful decisions – or you could call it taking a gamble – where to position their rates for 2024.

“Freight forwarders that choose to continue playing on the spot market are at risk of a pick-up in the market.”

But it’s not just forwarders gambling in 2024, Ms Stausbøll believes shippers will also have tough choices to make.

She said: “We have seen over the past few years how some shippers with flexibility in their procurement decisions switch at least some of their volumes onto the spot market. That may not be the best play in 2024.”

But since it published the data, Xeneta has warned that the Red Sea crisis could impact negotiations between shippers and ocean carriers. A spokesperson told The Loadstar today: “Shippers may feel a level of concern that long-term rates could follow the spot market and increase dramatically as a result of the Red Sea crisis.”

The data also revealed 2024 long-term rates for transatlantic routes offered by forwarders were higher than those offered by carriers – also a reversal of 2023.

Xeneta said it could shed some light on what’s driving the spread between carriers and freight forwarders.

“The lower rates offered by carriers suggests they are holding out little hope for a change in the supply/demand balance on this trade – unlike other major trades where they are clearly managing capacity to increase rates,” it said.

“On the other hand, freight forwarders are offering lower rates, which suggests they either already have, or believe they will be able to, procure space onboard ships at a lower price than the rates they are offering.”

Xeneta concluded: “It would be doing a disservice to freight forwarders to suggest this is merely a game of chance and clearly there are calculated risks being taken.

“Once negotiations are finished and contracts are signed for 2024, we will know where all the chips have been placed.”