Red Sea conflict continues, global long-term shipping rates rise
Date：05-07 151 Belong to：News Information
According to the latest data from the Xeneta Shipping Index (XSI®), ocean container carriers are treading a fine line between risk and reward in new contract negotiations as the Red Sea market remains plagued by uncertainty.
Xeneta's latest data released on May 2 showed that the global XSI index (the average price of all valid long-term contracts in the market) remained at 154.3 points in April, up only 1.7% from March.
However, judging from the sub-indexes in this global data, the market is dynamic, with the European import XSI index reaching 171.8 points, up 9.2% from March, the largest month-on-month increase since June 2022.
However, the XSI sub-index for US imports fell 9.4% to 150.6 points in April. In addition, although the global XSI index in April rose slightly month-on-month, it was still 50.1% lower compared to April 2023.
Emily Stausbøll, senior shipping analyst at Xeneta, said: “We have seen a sharp increase in XSI for European imports in April, mainly due to the ongoing impact of the Red Sea conflict. However, given that the spot market on the Far East to Mediterranean route is still up more than 60% compared to 12 months ago, you would think that shipping lines would push for higher long-term rates.
“The reason why operators are not asking for higher long-term rates is that they are concerned about overcapacity in an uncertain market. ”
Global container freight volumes rose 10.7% in January and February this year compared with the first two months of 2023, further strengthening the case for higher long-term freight rates.
Even the European import XSI sub-index, which recorded strong month-on-month growth in April, was 34.2% lower than the same period last year.
“New container ship deliveries have hit record highs in every quarter since the second quarter of 2023, but the conflict in the Red Sea has largely protected carriers from overcapacity so far in 2024, as rerouting around the Cape of Good Hope requires more ships to maintain service schedules,” said Stausbøll.
"If the situation changes and we see a massive return of container ships to the Red Sea over the next 12 months, this will leave shipping lines severely affected by overcapacity and spot market prices may plummet. Yes, carriers want higher long-term rates, but they also need to ensure long-term business volumes. Balancing risk and reward in such an unpredictable market is a delicate line they try to walk.
"Carriers and shippers certainly wish they had a crystal ball to know how the situation will develop over the next 12 months, but they don't, and this uncertainty shows that every negotiation is unique. ”
The US import XSI sub-index was 150.6 points, down 9.4% from the previous month and 67% compared to April last year (451.5 points). This is also the lowest level of the index since April 2021.
With many US shippers' long-term contracts running from April to May, next month's XSI data will reveal the results of recent negotiations.
Market data and intelligence have been at the heart of these discussions, according to Stausbøll. "Since the escalation of the Red Sea conflict in December last year, spot prices from the Far East to the US East Coast have steadily fallen by 33% from their peak in early February," she said. Over the same period, spot freight rates from the Far East to the US West Coast fell by 31%.
"US shippers used Xeneta data in long-term contract negotiations to highlight the weakness in the spot market and to obtain large discounts between bidding rounds. These new long-term contracts will take effect in May, so we can expect further changes in the XSI next month."
Xeneta's latest data released on May 2 showed that the global XSI index (the average price of all valid long-term contracts in the market) remained at 154.3 points in April, up only 1.7% from March.
However, judging from the sub-indexes in this global data, the market is dynamic, with the European import XSI index reaching 171.8 points, up 9.2% from March, the largest month-on-month increase since June 2022.
However, the XSI sub-index for US imports fell 9.4% to 150.6 points in April. In addition, although the global XSI index in April rose slightly month-on-month, it was still 50.1% lower compared to April 2023.
Emily Stausbøll, senior shipping analyst at Xeneta, said: “We have seen a sharp increase in XSI for European imports in April, mainly due to the ongoing impact of the Red Sea conflict. However, given that the spot market on the Far East to Mediterranean route is still up more than 60% compared to 12 months ago, you would think that shipping lines would push for higher long-term rates.
“The reason why operators are not asking for higher long-term rates is that they are concerned about overcapacity in an uncertain market. ”
Global container freight volumes rose 10.7% in January and February this year compared with the first two months of 2023, further strengthening the case for higher long-term freight rates.
Even the European import XSI sub-index, which recorded strong month-on-month growth in April, was 34.2% lower than the same period last year.
“New container ship deliveries have hit record highs in every quarter since the second quarter of 2023, but the conflict in the Red Sea has largely protected carriers from overcapacity so far in 2024, as rerouting around the Cape of Good Hope requires more ships to maintain service schedules,” said Stausbøll.
"If the situation changes and we see a massive return of container ships to the Red Sea over the next 12 months, this will leave shipping lines severely affected by overcapacity and spot market prices may plummet. Yes, carriers want higher long-term rates, but they also need to ensure long-term business volumes. Balancing risk and reward in such an unpredictable market is a delicate line they try to walk.
"Carriers and shippers certainly wish they had a crystal ball to know how the situation will develop over the next 12 months, but they don't, and this uncertainty shows that every negotiation is unique. ”
The US import XSI sub-index was 150.6 points, down 9.4% from the previous month and 67% compared to April last year (451.5 points). This is also the lowest level of the index since April 2021.
With many US shippers' long-term contracts running from April to May, next month's XSI data will reveal the results of recent negotiations.
Market data and intelligence have been at the heart of these discussions, according to Stausbøll. "Since the escalation of the Red Sea conflict in December last year, spot prices from the Far East to the US East Coast have steadily fallen by 33% from their peak in early February," she said. Over the same period, spot freight rates from the Far East to the US West Coast fell by 31%.
"US shippers used Xeneta data in long-term contract negotiations to highlight the weakness in the spot market and to obtain large discounts between bidding rounds. These new long-term contracts will take effect in May, so we can expect further changes in the XSI next month."
