** Sagar Sandesh is now published as BI Weekly E-paper and is being released on Every Monday and Thursday**

Container price war underway, contract rates plummeting

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 per feu.

 “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 Xeneta.

The falling 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."

Copyright © 2020 PORT TO PORT - Shipping Services Portal ( Sagar Sandesh ). All rights reserved.

Follow Us