The latest market updates
from market intelligence platform Xeneta and analyst Sea-Intelligence paint a
bleak picture for the container market as container lines choose a price war
over aggressive capacity management.
Xeneta’s data shows
that on the five major fronthaul routes
out of Asia, contract rates were on average $3,900 per feu higher than spot
rates as of 12 December 2022. The same measurement on 12 February 2022 was $810
“The corridor with the greatest fall was the
Far East to US East Coast, where a long-term premium of $5,180 per feu in
mid-December collapsed to $1,280 over the course of the next two months,” said
contract rates mark the end of a costly COVID hangover for shippers. The high
freight rate environment caused by equipment and personnel shortages, terminal
congestion and increased consumer demand in the wake of the pandemic was locked
in by longterm contracts signed when shippers feared further rate rises
and needed to secure space on vessels.
As container congestion
eased and spot prices began to fall, many shippers were left paying over the
odds for shipping until contract renewals came around.
Xeneta chief analyst Peter
Sand said that shippers are now “firmly in ascendancy” in those negotiations.
Container lines have chosen
not to cut capacity in the latest demand collapse with market data showing no
link between demand and capacity in recent months.
Summarising the current
state of the market, Murphy said: “This can only be seen as a choice on the
part of the carriers. A choice to allow overcapacity to persist, is also a
choice to allow for low utilisation, and thus to allow for freight rates to
continue to drop. This is a behaviour we
know by a different word: A price war."