Container shippers are looking to renegotiate long-term contracts on the back of falling spot markets.
Long-term container freight rates appear to have peaked amid sliding short-term spot markets.
Spot rates from Asia to the US West Coast dropped 6% to $6,593 per 40-foot equivalent unit (feu) in the week to 27 July, according to the Freightos Baltic Index.
That is a level last seen in May 2021, and two-thirds lower than a year ago.
Spot rates from Asia to northern Europe were down 7% in the past two weeks.
These are 30% lower than last year at $9,641 per feu, having been stable since the end of April, according to Freightos analyst Judah Levine.
The falls have led to a shift in the attitude of shippers, according to a survey by the customer base freight benchmarking site Xeneta.
Large volume shippers, in particular, find themselves in a stronger negotiating position, Xeneta chief executive Patrik Berglund noted.
Many shippers are looking to renegotiate contracted rates, given the recent spot market drops.
Berglund predicted “an interesting few months ahead”, considering that 44% no longer feel confident in the stability of long-term contracts.
Of that figure, 22% were more likely to allocate lower volumes only to cheaper contracts.
A further 22% preferred to move allocation to the spot market as soon as prices dip below long-term rates.
Long-term container freight rates appear to be peaking, having more than doubled in the past year, Xeneta said.
Longer contracts are 112% higher than this time last year and 280% up against July 2019, according to the Xeneta Shipping Index.
The rate of growth in long-term contracted ocean freight rates is slowing on a monthly basis as spot rates continue to weaken.
Berglund noted that increases in long-term rates in July are the slowest since January, and the upward pressure on long-term agreements is easing as spot rates fall across major trades.
In addition, volumes on many corridors are down. Containerised European imports fell by 3% and exports by 6% in the first five months of 2022.
“July has seen yet more upticks across the board, but the signs are clear there is a shift in sentiment as some fundamentals evolve,” he said.
“So, indications are there that we may have reached a peak and that prices of new agreements are more likely to hold than suddenly leap up again, as we’ve become accustomed to seeing of late.”