News / Shippers pushed towards spot rates as contract negotiations stall

Photo: © Pavlo Syvak

While container spot rates on the Asia-Europe and transpacific tradelanes appear to have reached a nadir, start dates for many new long-term contracts remains uncertain.

Indeed, with contract negotiations stalled and demand weak, shippers, BCOs and NVOCCs are switching a much higher percentage of their business to the spot market.

In fact, carriers are actively encouraging their contract customers to book cargo via spot, rather than lose them to cheaper competitors and have to buy them back later.

The Asia to North Europe component of the Freightos Baltic Index (FBX) was flat this week, at an average of $1,349 per 40ft, and it is clear that carriers are prepared to do whatever it takes, in terms of capacity management, to prevent rates on the route dipping below $1,000.

The FBX reading for Asia to the US west coast this week was also stable, at $1,005 per 40ft, while US east coast rates steadied at $2,100 after recording losses in previous weeks.

Transpacific carriers are ratcheting-up their blanking programmes to mitigate the impact of reduced demand and further downward pressure on freight rates – for instance, 2M partners Maersk and MSC today announced the cancellation of their TP6/Pearl and TP2/Jaguar sailings from China on 13 and 21 April, respectively.

Meanwhile, Xeneta’s long-term rate analysis for March saw the freight rate benchmarking firm’s index record just a 0.5% fall in its crowd-sourced data, after hitherto slumping by a quarter since August last year.

Xeneta CEO Patrik Berglund explained that this did not mean there had been a rebound in liner markets, but it was result of a lack of new contract data from its shipper clients. He explained: “The principal reason for the relatively small decline is a lack of new contracts entering validity, rather than any strengthening of fundamentals.

“The major tendering season in Europe has passed, whereas it’s looming large on the horizon for the US market. The prospects of carriers being able to maintain their current long-term rates here look slim, to say the least,” said Mr Berglund.

He said he expected “some major falls” in new contract rates in the coming months which, in turn, would sharply drag down the XSI reading.

“Unless something drastic happens, I think long-term contracts in the second half of the year will look very different to those that were valid at the start of 2023,” he added.

Elsewhere, container spot rates on the transatlantic continued their week-on-week erosion, with Xeneta’s XSI North Europe to the US east coast component shedding another 8% in the past seven days, to $3,975 per 40ft.

Moreover, The Loadstar heard this week from a North Atlantic carrier trade manager that market rates had already fallen below $3,000.

“I expect we will be back to $2,000 per box before June,” he said.