Long-term contracted ocean freight rates climbed by 7% in March, pushing shipping prices up 96.7% year-on-year, even though spot rates continued their long decline.
“A combination of relentless demand, port congestion, equipment shortage and Covid disruption have driven the rates trendline to new heights – facilitating huge profits for carriers and worrying times for shippers,” a release from Xeneta explaining the long-term rates stated.
“Long-term rates are reaching all-time highs, and carriers are undoubtedly sitting pretty in contract negotiations, but there are signs that future adjustments may be edging onto the horizon,” commented Patrik Berglund, CEO of Xeneta.
Berglund pointed out that, for example, rates on key Asia-Europe trades are declining, with carriers such as Maersk and MSC announcing plans to void sailings to combat sluggish demand. A potential resurgence of Covid in China, and resultant lockdowns, could add to a sense of increasing volatility and fluctuating demand, Berglund added.
Commenting via LinkedIn on the Xeneta data, Bjorn Vang Jensen, vice president at liner consultancy Sea-Intelligence, questioned how water-tight these long-term contracts really are, especially if they do not include some type of indexation.
“When the market does turn, as it surely will one day, I am very sure that an army of lawyers will go through them with a fine-tooth comb looking for any loophole. It is also possible that shippers will simply line up at the shredder and revert to old behaviours,” Jensen suggested.